Trend Type Indicator Using ATR, ADX, and Directional Movement
Summary
The indicator classifies market conditions as upward, downward, or sideways. It first checks for sideways conditions using two optional filters: ATR at or below its moving average, and ADX at or below a user-set threshold. If neither filter flags a sideways market, the comparison of positive and negative directional indicators determines the trend direction. A smoothed oscillator displays the resulting three-state classification.
The author suggests checking agreement across lower and higher timeframes before using the classification to support trend trading. The displayed status is shifted backward by eight periods by default, so the plotted position does not correspond to the latest bar without accounting for that lag. The document explains the indicator’s rules and intended use but gives no performance tests or evidence that multi-timeframe agreement improves results. ATR and ADX thresholds, smoothing, and timeframe choices can affect the classifications.
Key ideas
- The indicator classifies conditions as uptrend, downtrend, or sideways.
- Sideways detection can use ATR below its moving average, ADX below a threshold, or either condition.
- When conditions are not classified as sideways, positive and negative directional indicators determine direction.
- Smoothing reduces changes in the displayed trend-state oscillator.
- The default display is shifted by eight periods, and the document provides no performance validation.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.