MI crosses below the +DMI. They go on to 
232 Appendix
show well-chosen examples where you could have followed this simplesystem and made large sums of money. However, nothing could be fur-ther from the truth. What they fail to show you is how much money youwould lose as the DMIs cross back and forth.
USING THE ADX
High ADX readings reflect a strongly trending market. Conversely, lowADX numbers reflect non-trending markets. The minimum reading todetermine a “trend” is subject to debate. In general, 14-day ADX read-ings above 30 suggest a strongly trending market. Those who only wishto trade the strongest of markets may look for readings of 35 or higher.The trade-off here is that the stronger the number, the longer the trendhas been in place. Therefore, much of the original move (that caused theADxX to rise) is missed. Those who look to catch early trends may lookfor markets with an ADX of 25 or higher. Not surprisingly, the trade-offhere is that these markets are more prone to failure because they have yetto “prove” themselves.
The advantage of the ADxX is that it provides a standardized way of mea-suring trend. This lends itself well to computerized scans for findingtrending markets (i.e., the TradingMarkets.com ADX Search and Filter).These markets can then be watched for potential entries signals frombreakouts, pullbacks, cup-and-handle patterns, and so forth. Coun-ter-trend traders, those who tend to fade markets (trade opposite to thetrend) may look to trade markets that are in a trading range or notrending as measured by a low ADX reading.
SUMMARY
The ADx is based on the directional movement, positive or negative of amarket. The positive directional movement is the portion of today’srange that is above yesterday’s high. The negative directional movementis the portion of today’s range that falls below yesterday’s low.
Only one directional movement is calculated for each day. Therefore, ifthere are both +DMI and -DMI for a given day (i.e., an outside day) thenthe larger of the two becomes the directional movement. If today’s rangedoes not trade above or below the prior day (i.e., an inside day) thenthere is no directional movement for that day.Appendix 233
The ADX is calculated by taking the difference of the average directionalmovement values over a given time period. The ADX measures trend butnot direction. The direction of the market is determined by comparingthe +DMI to the -DMI. If the +DMI is greater than the -DMI the marketis uptrending; if the -DMI is greater than the +DMI the market isdowntrending. High ADX readings suggest a market is in a strong trend. 
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