Description
The DMI Stochastic Extreme is a technical indicator that applies stochastic calculation algorithm to values of DMI Oscillator.
Two values are found on the specified period: hh and ll, the former being the highest DMI Oscillator value and the latter being the lowest. The Stoch plot is calculated as the percent ratio between two sums: sum of (osc - ll) values and that of (hh - ll) values, both sums found on the "sum length" period. DMI Stochastic Extreme study finds crossovers of the Stoch plot with Overbought and Oversold levels and marks them with arrows.
According to Barbara Star's article "The DMI Stochastic", not each arrow should be interpreted as a Buy or Sell signal; the author suggests using them along with DMI Oscillator instead. When the DMI Oscillator is positive, up arrows might suggest a Buy signal; when the DMI oscillator is negative, down arrow might be considered a Sell signal.
Input Parameters
| Parameter | Description |
|---|---|
length
|
The number of bars with which the DMI oscillator is calculated. |
high low length
|
The period on which highest and lowest values of DMI oscillator are found. |
sum length
|
The number of bars for which the sums of values are calculated. |
over bought
|
The overbought level. |
over sold
|
The oversold level. |
Plots
| Plot | Description |
|---|---|
Stoch
|
The DMI Stochastic plot. |
OverBought
|
The overbought level. |
OverSold
|
The oversold level. |
Up
|
Crossovers of Stoch plot above the oversold level. |
Down
|
Crossovers of Stoch plot below the overbought 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.