DMI_Oscillator

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:

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  • 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.

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