1. Operate only from long positions when the positive directional line is above the negative. Trade only from short positions when the negative directional line is above the positive. The best time to trade is when the is on the rise, showing that the dominant group is strengthening.
2. When the falls, it shows that the market is becoming less discretionary. There are likely to be a few unexpected turns. When the points down, it is preferable not to use trend tracking methods.
3. When the falls below both directional lines, this identifies a flat and sleepy market. Do not use a trend tracking system, but be prepared to trade as major trends emerge from such calm periods.
4. The best individual directional signal is given after the falls below both directional lines. The longer it stays there, the stronger the base of the next move will be. When the rebounds from below both directional lines, it shows that the market is waking up from a calm period. When the grows four or more steps (for example, 9 to 13) from its lowest point below both directional lines, it is "ringing the bell" on a new trend. It shows that a new bull or bear market is emerging, depending on which directional line is above it. When the rebounds above both directional lines, it is identifying an overheated market. When the crosses both directional lines down, it shows that a major trend has entered. It is a good time to collect benefits in a directional operation. If you trade from long positions, you will definitely want to pick up partial gains. Market indicators give strong signals and weak signals. For example, when a moving average changes direction, it is a strong signal. A downward inflection of the is a weak signal. Once you see that the has been turned down, you should be very careful adding to open positions. You should start to collect profits, reduce positions and try to exit.
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