Forex encyclopedia

Over a long time of work on the Forex market, traders accumulated a bulk of material regarding monitoring price charts. This experience allows to conclude about regularity of lines combinations, which form so called graphic figures. Outline of those figures allows to forecast further movement of price. Chart analysis gained popularity among traders and became a full-fledged analytical and forecasting instrument. All figures of Forex chart analysis are usually divided into two groups: the figures telling about keeping current tendency and reversal figures. As it is already clear from their names, continuation figures tell that main direction of current price won't change and current trend will keep on. On the contrary, reversal figures alert us that in the nearest time change of main tendency should be expected.

Average Directional Index , ADX represents part of the system of Directional Movement Index and is based on filtration pursuant to paces of price change. It was first time introduced by J. Welles Wilder in 1978 in "New Concepts in Technical Trading Systems" book. ADX figures should be of immediate interest when its value is above 20 - 22. When ADX is reversed from top to bottom, current tendency loses its intensity and probability of correctional movement or reversal grows. Therefore, when ADX enters zone of extreme values, it is important to trace a probable change of trend's direction.