DMI AND W%R
Directional Movement Indicators
Wilder's Directional Movement Index (J.W. Wilder, Jr, New Concepts in Technical Trading Systems, Trend Research, P.O Box 128, McLeansville, NC 27301) is a filtering momentum that measures movement in the up direction relative to movement in the down direction.
Four directional movement indicators are available: Plus Directional Movement (PDI); Minus Directional Movement (MDI); Directional Movement Indicator (DX); Average Directional Movement (ADX).
Formulae:
Plus Directional Movement = PDM= H-Hp
Minus Directional Movement = MDM =L - Lp
Where:
H is the highest price of the current period.
Hp is the highest price of the previous period.
L is the lowest price of the current period.
Lp is the lowest price of the previous period.
Cp is the closing price for the previous period.
If |H-Hp| > |L-Lp| then DM is PDM and MDM is zero.
If |H-Hp| < |L-Lp| then DM is MDM and PDM is zero.
TR = True Range = is the largest of H - L; H - Cp; or L - Cp
The four directional movement indicators are:
Plus Directional Movement
PDI = EMA(PDM) / EMA(TR)
Minus Directional Movement
MDI = EMA(MDM) / EMA(TR)
Directional Movement Indicator
DX = (PDI - MDI) / (PDI+ MDI)
Average Directional Movement
ADX = EMA(DX)
Where:
EMA indicates exponentially smoothing.
Reference: Colby, Thomas & Robert Meyers, The Encyclopedia of Technical Market Indicators, Dow Jones Irwin, Homewood, Illinois, 1988.
Parameters: The only adjustable parameter is the period length which can be changed in the Directional Movement Indicator parameter box.
Defaults: Period=15.
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Williams' Percentage Range measures the position of the current period's close to the range of prices over a time period. The number is expressed in percentage terms. It is the similar to Lane's Stochastic except it uses the low rather than the high in the numerator. Percent R can take values between zero and 100.
Formula:
%R = ((H-C)/(H-L)) * 100
Where:
C is the closing price for period n.
L is the lowest price over period n.
H is the highest price over period n.
n is the period length.
Reference: Kaufman, Perry, The New Commodity Trading Systems & Methods, John Wiley, 1988.
Parameters: The period, that is number of time intervals to include in the calculation of the range, is a user defined parameter.
Default: Period=10. |
