Description
The DMI Oscillator is a technical indicator which uses values of DMI in order to predict miscellaneous sides of market behavior.
Two components of DMI are used in calculation: DI+ and DI-; the DMI oscillator calculates the difference between these components and represents it as both a line and a histogram.
According to the rules described by Barbara Star in her article "The DMI Stochastic", the following market conditions can be predicted:
-
When the oscillator is positive and decreasing, a consolidation or pullback might take place. When price is in uptrend and the oscillator is positive but makes lower highs, a bearish divergence might be identified.
-
Conversely, when price is in downtrend and the oscillator is negative but keeps moving up, a bullish divergence might take place.
-
Trend continuation might be identified when the oscillator moves to the zero line and then rebounds from it.
-
In quiet markets, oscillator values fluctuating near the zero line (approx. -10 to +10 range) might signify sideways or rangebound price action.
Input Parameters
| Parameter | Description |
|---|---|
length
|
The number of bars with which the DI+ and DI- components are calculated. |
paint bars
|
Defines whether or not to color price plot according to respective oscillator values (red for negative, green for positive). |
average type
|
The type of moving average to be used in calculations: simple, exponential, weighted, Wilder's, or Hull. |
Plots
| Plot | Description |
|---|---|
Osc
|
The DMI Oscillator line plot. |
Hist
|
The DMI Oscillator histogram plot. |
ZeroLine
|
The zero level. |
Further Reading
1. "The DMI Stochastic" by Barbara Star, PhD. Technical Analysis of Stocks & Commodities, January 2013.
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.