DMI Direction Movement IndictorThe directional movement indictor, contains three lines, positive direction, +DI, negative direction, -DI, and average directional movement indictor.
The +DI directional line is the average of the moves towards higher prices, that is the average (exponential moving averages) of the one periods high minus the last periods high, or zero if the stock isn't moving upwards. It tracks how (if at all) fast the stock is moving upwards.
Similarly the -DI direction line, is the average of one periods low minus the last periods low, providing the stock is moving downwards. It tracks how (if at all) slow the stock is moving downwards.
The ADX line is exponential moving average of the, the positive difference between the two directional indictors divided by there sum. It tracks how strong the direction of the market is.
Using Dr. Alexander Elders technique, we mark trading signals on the chart, which at the following times.
Go Long, (green upward mark), when ADX rises while +DI is above -DI, provided the ADX started below -DI. Exit (Blue X) when ADX falls or -DI rises above +DI.
Similarly go Short, (red downward mark), when ADX rises while -DI is above +DI, provided the ADX started below +DI. Exit (Blue X) when ADX falls or +DI rises above -DI.
Using the edit button you can change the period for the moving averages, and you can also switch on and off the drawing of each of the three lines.