http://www.esignallearning.com/education/marketmaster/strategy/volume/sells.aspx
An ADX Volume Breakout Basic Trading Strategy : The Sell / Short Strategy
| 1. |
- Identify an issue that is taking out new multi-day low (2-day low for day trades, 5-day low for swing trades) and for which the ADX line is between 30 and 40.
- Check that the (blue) -DMI line has recently crossed to the upside over the (green) +DMI line.
- Confirm that volume bar size is increasing to at least 30% greater than the immediate past volume bar size.
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| 2. |
- Sell the position short once the ADX gets over 40, and the stock is taking out a new low on increasing volume.
- Trail an initial protective cover stop at the previous day's low.
- As the position moves in your favor, trail a protective stop at the high end of the prior bar/candle.
- Use the same ADX and volume-based trailing stop strategies as described in the buy strategy because the ADX / DMI and volume indicators are identical.
Combining ADX / DMI with volume bar increases helps to identify both the emergence of a new breakout entry and the flattening of a trend, once the ADX drops to under 40 and volume starts to decline. Using these technical indicators together as a system can help filter out false breakouts and ensure that breakout entries are the strongest at the time of entry. |
