The minus directional indicator used in conjunction with the other indicators all the trader or investor to determine bother direction and strength, allowing them to find the more ideal entry and exit points on a chart. With that, not all indicators are one hundred percent accurate, but this is a widely used tool and is fairly reliable at letting traders and investors know when it is time to look at the chart.
Using this indicator allows the user to find trends based upon price. However, since it is very much dependent upon price, you need to be sure to take a look at the fundamental health of the underlying market you are researching or trading. Price is certainly a driving factor in buying or selling a stock, you still need to look under the hood and see if the engine is running well.
Taking a step further, many use 20 as the level of whether there is a strong trend present. This means if the indicator is showing a number above 20, the trend is strong enough to warrant respect in the current direction it is heading. Anything under 20 can be looked at as a weak trend and it may reverse in the near future.
Use this indicator and see if it will fit well with your current setup. Knowing how strong the current market is along with the direction it is heading is important because it can give you that extra edge in your trading or investing. If you need help, there are a multitude of resources on the Internet so be sure to check them all out and gain a full understanding.
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Nathan Young is a Senior Member of Macroaxis Editorial Board - US Equity Analysis. With years of experience in the financial sector, Nathan brings a diverse base of knowledge. Specifically, he has in-depth understanding of application of technical and fundamental analysis across different equity instruments. Utilizing SEC filings and technical indicators, Nathan provides a reputable analysis of companies trading in the United States.
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