Description
The Directional Movement Index (DMI) comprises three plots: DI+, DI-, and ADX (Average Directional Index). DI+ is calculated as an average increase of high price (if the high price decreases, 0 is taken), divided by the ATR (Average True Range) and multiplied by 100. DI- is calculated similarly, using the decrease of low price instead. By default, in the calculation of both DI+ and DI-, the Wilder's average is used, however, you are free to choose other average types in input parameters. ADX is calculated as an average of the directional index; the average type is the same as in DI+ and DI. The directional index, in turn, is equal to the percentage ratio of the absolute value of difference between DI+ and DI- to their sum.
DMI is a trend-following indicator. DI+ crossing above the DI- suggests uptrend conditions, and vice versa, DI+ crossing below the DI- might signify the downtrend. ADX is used for confirmation: trend indications are more likely to be correct if ADX is rising and its values are above 50.
Input Parameters
| Parameter | Description |
|---|---|
length
|
The number of bars used to calculate DI+, DI-, and ADX. |
average type
|
The type of moving average to be used in calculations: simple, exponential, weighted, Wilder's, or Hull. |
Plots
| Plot | Description |
|---|---|
DI+
|
The Plus Directional Indicator. |
DI-
|
The Minus Directional Indicator. |
ADX
|
The Average Directional Index. |
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.