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ADX & DMI
I have a question for the author of “Identify The Start Of A Trend With DMI” from your November 2012 issue.
Having just recreated the worksheet shown in the article’s sidebar beginning on page 18 of the November 2012 issue, I am not clear on which columns are to be graphed. Please help with this.
As for the author’s technique, it looks quite interesting. Has the author explored using this technique intraday?
Thanks, and my apologies for my lack of understanding.
Author BC Low replies:
I’m not sure what software you are using, but I use MetaStock, and I simply add the ADX, +DI, and -DI lines into three windows, and you are ready to read the signals.
I do not have software that can create the three lines intraday. As such, my techniques tend to apply to end-of-day charts. In general, intraday signals are trickier, I feel.
The sidebar on ADX merely shows how to calculate the ADX. It does not reflect or implement the system discussed by Low in his article.
For an example of how to implement BC Low’s technique in Microsoft Excel spreadsheet software, please refer to the Traders’ Tips section of our November 2012 issue and see Ron McAllister’s contribution on page 77 of that issue. This is also available in the Traders’ Tips area of our website at http://www.traders.com/index.php/sac-magazine/departments/traders-tips/1830-microsoft-excel-november-2012 (or click on the Traders’ Tips link from our homepage at Traders.com and scroll down to the “Microsoft Excel: November 2012” item, or type “November 2012” in the title filter search box in the Traders’ Tips area).
ADX & DMI SETTINGS
I read with interest BC Low’s November 2012 article, “Identify The Start Of A Trend With DMI.” Unless I am being obtuse, what are the other two settings the author proscribes for the ADX? (One the settings is 3; the DI settings used were 5, 8, and 13.)
Author BC Low replies:
The parameters for the ADX cluster lines are 3, 4, and 5. The parameters for both +DI and -DI lines are 5, 8, and 14. These numbers were mentioned in the article.
I hope the clusters will be of some help. It took me a while to create them, and more time to get value out of them. I feel I should be open about the concept just as J. Welles Wilder was with his DMI.
I am a subscriber of your magazine and have a question. I am currently trying to solve the following problem:
Given the average size of winning trades compared with the average size of losing trades, what does risk/reward and strike rate need to be for profitability?
Is there an article in the S&C archives that addresses this problem? Can you provide me with the references?
I can’t identify any articles in our archive that specifically discuss this or address this question. We have, however, published several articles on money management that discuss methods to calculate risk/reward ratios.
Perhaps someone reading this would like to write in to propose something that may help solve this problem or to suggest outside sources for studying this question.
You could also try using the search engine at our website, Traders.com, to help locate any relevant articles or to locate articles we’ve published on money management and calculating risk/reward ratios.
Of course, there is not always an easy “one size fits all” answer when it comes to what the optimal risk/reward ratio is, or where you should exit (strike rate) for optimal profit.—Editor
I live in India and am a great fan of your magazine. I want to know whether any distributor for the magazine S&C is available in India.
There isn’t a distributor in India per se, and this magazine isn’t available on newsstands overseas, but you can subscribe directly from our office to receive the hardcopy magazine in the mail or opt to log onto our website and read the digital edition (or both!). As a paid subscriber, you would have access to everything at our website.—Editor