The application of the indicator in the Forex ADL provides a comparison between the number of times when the market advances and the number of times when backs, in a specified time frame.
The indicator ADL
ADL = (number of bars on the rise - the number of bars down) + ADL value of the previous period
Increase the ADL and price - good condition dell'uptrend
ADL decline and prices - good condition of the downtrend
Divergence between ADL and prices - can pause / reversal of the trend
Trading with the indicator ADL
In general, when the market is under uptrend and the indicator ADL is falling (thus forming a divergence) is possible that the current trend is losing strength and is next to the reversal. If the market is trending upward and the same happens to the ADL line, the situation is stable and the current trend is solid.
A divergence between the indicator and price is an alarm; a factor of divergence indicator for the ADL can not last long, so the ADL can not be used as an indicator of time.
On daily basis, the ADL can be used to determine the strength and length of the trend of short-term intra-day forex. On weekly basis, the indicator ADL may be more useful for comparisons of trends over long (perhaps annual).
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