ADX and Directional Indicators for Trend Following

Summary

This strategy combines ADX with the positive and negative directional indicators to identify trend strength and direction. It enters long when ADX is above a configurable threshold and rising over a lookback period, with DI+ above DI−; the short setup reverses the directional condition. A decline in ADX over the same lookback prompts closing positions. An optional moving average filter compares price with a configurable EMA or SMA, and the document lists default indicator settings and a BTC/USDT futures backtest window.

The material explains the signal rules and adjustable settings, but reports no backtest performance results. It warns that ADX can lag, DI signals can be noisy, and moving average filtering can exclude short-term trades. Results may also depend on parameter choices and the selected backtest period, which can encourage overfitting. Stop losses and multi-asset testing are suggested as possible extensions, rather than established parts of the described rules.

Key ideas

• ADX above a threshold and rising signals that trend strength is building.
• DI+ above DI− selects long direction, while DI− above DI+ selects short direction.
• The strategy closes positions when ADX declines over the chosen lookback.
• An optional EMA or SMA filter checks price direction against a moving average.
• The document provides no performance evidence and flags lag, noisy signals, and overfitting risk.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.