This indicator was created by J. Welles Wilder to complete the ADX in terms of measuring the strength of a trend. Wilder said the DMI should be used in conjunction with the ADX as a filter.
In general, the second line of ADX and DMI line is displayed in a chart oscillators simultaneously with three different colors. The combination of these colors depends on the charting software that is used.
DMI consists of two lines called lines DI plus (DI+) or often called the Positive Directional Indicator; and DI minus (DI-) or Negative Directional Indicator. Expressed as a buy signal if the 'DI+' line cut into the top line of 'DI-'; and sell signals when the 'DI+' line cut down the 'DI-' line.
Standard period used for the ADX and DMI is to use a period of 14 days (on the daily charts). Can also be used on a weekly chart or monthly chart with a period of 14 weeks or 14 months. However, the standard period of perceived less effective because too often produce bad signals. To get good accuracy of this period would need to be repeated by adjusting the settings (back test) on each stock that have different characteristics.
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