Description
The Directional Movement Index (DMI) is a reliable technical indicator that assesses both the power and course of price movements, effectively minimizing false signals. Introduced by J. Welles Wilder Jr. in 1978, the DMI is a helpful instrument for traders and investors aiming to examine market trends.
Input Parameters
- Length: Number of periods used in the calculation.
- Lower: Presets to 25 which represents the lower boundary of the indicator.
- Upper: Presets to 50 which represents the upper boundary of the indicator.
Use Cases
- Buy and Sell Signals: A buy signal is generated when the +DI line crosses above the -DI line, indicating an upward trend. Conversely, a sell signal signifies a downward trend when the -DI line crosses above the +DI line. Traders should also consider the ADX value; a value above 25 implies a strong trend, while a value below 20 indicates a weak or non-trending market.
- Combining with other indicators: To increase the accuracy of trading signals, the DMI can be paired with other technical indicators such as moving averages, RSI, or MACD. This method helps confirm the trend’s strength and direction, reducing the probability of false signals.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.
May 17, 2024