ADX & EMA Trend
Measure trend strength with ADX and identify entries using EMA pullbacks.
What are ADX and EMA?
The Average Directional Index (ADX) measures trend strength on a scale from 0 to 100, regardless of direction. Values above 20-25 indicate a strong trend. Exponential Moving Averages (EMAs) are weighted moving averages that give more importance to recent prices. The relationship between fast and slow EMAs reveals trend direction — when the fast EMA is above the slow EMA, the trend is up.
How They Work Together
ADX tells you how strong the trend is; EMAs tell you which direction. A powerful strategy combines both: wait for a strong trend (ADX > 20), confirm direction with EMA alignment (fast above slow for bullish), then enter on a pullback to the fast EMA. This 'pullback-to-EMA' approach lets traders enter trends at favorable prices rather than chasing momentum.
How StockSkier Uses Them
StockSkier's trend entry system uses an 8-period fast EMA and 30-period slow EMA with a minimum ADX threshold of 20. When ADX confirms a strong trend and price pulls back to the fast EMA while the fast EMA remains above the slow EMA, the model generates a trend entry signal. These trend entries use a 75% position size with a tighter 20% trailing stop, capturing continuation moves within established trends.
- ▲ADX measures trend strength (>20 indicates a meaningful trend)
- ▲EMA crossovers signal trend direction changes
- ▲Pullback-to-EMA entries offer favorable risk/reward within trends
- ▲Combining ADX + EMA filters out low-conviction entries
- ▲StockSkier uses EMA 8/30 with ADX >20 for trend continuation entries