Hi Dennis,
DMI (Directional Movement Index). (also known as DI + & DI -)
DMI + & DMI - are plotted in their own scales.
The technical definition:
Directional Movement is the portion of today's (price) range that it is outside of the previous day's (price) range.
The Directional system checks whether today's range extends above or below the previous day's range and averages that data over a period of time.
The value + or - has to do with the magnitude by which today's range exceeds yesterday's range, and which side is larger, (either above or below yesterday's range).
The plain English definition:
It is a long term trend indicator, when DMI + crosses over DMI - it suggests an up-trend, the reverse indicates a down-trend.
Developed by J. Welles Wiilder Jr.
Part of the Directional system is the ADX (Average Directional Index) Plotted in its own scale.
This component assists you in determining WHEN is it worth using the DMI +/- indicator, by showing you the STRENGTH of the established trend, AND if the trend is about to change.
ADX measures the spread between Directional lines (+DMI and -DMI)
ADX is smoothed with a moving average.
The net result is that when the ADX line is rising, it suggests a strong trending market, (whether up or down, which is determined by the DMI lines crossing over)
When the ADX line is going down, it suggests a weak (or weakening), trend. However, when it falls below the value of 15 (or better yet, 10), in its own scale, it is suggesting that while the trend is weak, the moment that the ADX line turns UP, it suggests that a new trend is being formed, and as the line rises, it will confirm the strength of such trend.
Also, when the ADX line TURNS down, (particularly above the value 40 in its own scale), it suggests a CHANGE in the current trend.
The ADX line does not tell you which direction the trend is going, it only shows you the strength of the current trend and the possibility of change, (when it turns as described above).
There are formulas to calculate all this, however I am lazy and I let the computer do that.
The main objective in my following this is the identification of trends, which I believe the OX's charts do the same thing, and that is where my interest lies.
I hope this helps and clarify rather than confuse the issue.
Further reading on the above, particularly formulas and all that....
Trading for a Living by Dr. Alexander Elder. Page 135.
And J. Welles Wilder Jr. own book...... "New Concepts in Technical Analysis" ("New" at the time then, which it was the mid 70's)
As for your comment:
Interesting to see your use of candles. I think they improve your timing with XO's and increase your confidence.
Given the fact that I am a complete neophyte in terms of OX's, I view it from the reverse angle, that is:
"I [hope to] think, that the use of OX's will improve my confidence in the use of the candles"
Of course, as my knowledge increases in the OX's, this may change.
Oh ! and by the way, there is always a different way to look at candles in Technical Analysis....
See... #reply-6850056
Thanks for the Welcome.
Z. |
