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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 680.27-0.5%Dec 1 4:00 PM EST
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To: HairBall who wrote (32992)11/9/1999 7:49:00 PM
From: Casaubon  Read Replies (2) of 99985
 
LG,

when using the DMI indicator IQC says the following:

1.ADX should be rising
2.ADX should be above 50
3.Confirmation from another indicator is encouraged pointing towards strong trending or volatility characteristics.

A more strict interpretation of the Directional Moving Index calls for a fourth criterion to be met. For an uptrend to be valid, the price of the security must rise above the high of the day that the +DI crossed above the -DI. For a downtrend to be valid, the price of the security must dip below the low of the day that the +DI crossed under the -DI.

All these criteria never occur simultaneously. Do you use a single criteria here for confirmation of the trend. For example, if the ADX is above 50 and +DI crosses over -DI, the trend is valid. Or, the ADX is rising when the +DI crossed over -DI (not rising AND above 50). Also, I noticed you placed value in the DI crossover when the ADX was flat and at a minima on the chart you just posted (it was the first crossover on that chart, where +DI crossed under -DI).
Can you say something about why you consider that crossover as having trending predictability.

I know this indicator has strength and I'm trying to get a better handle on it. Any insight you could provide would be greatly appreciated.
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