The Directional Movement Index is also known as DMI. DMI is a momentum indicator . It is calculated using the price. It first compares the current price with the previous price range, and displays the result as an upward movement line (+DI), and a downward movement line (-DI), between 0 and 100. The DMI also helps in calculating the strength of the upward or downward movement, and displays the result as a trend strength line (ADX).
An interesting factor that plays an important role in determining the DMI should be noted here. The concept of Directional Movement is based on the assumption that in an upward trend today’s highest price is higher than yesterday’s highest price, and in a downward trend today’s lowest price is lower than yesterday’s lowest price. If such a case, it is a matter of the so-called Outside Days. The difference between today’s high and yesterday’s high corresponds to the Plus Directional Movement (+DI). The difference between today’s low and yesterday’s low is the Minus Directional Movement (-DI). These Outside Days consist of a +DI as well as a -DI.
There are days in which yesterday’s highest price or yesterday’s lowest price are not exceeded. Such days are described as Inside Days and contain a +DI and a -DI, or zero. Do not let the plus or minus sign designation mislead you. They only indicate upward or downward movement and not values. The directional movement value is always a positive number of absolute value, regardless of upward or downward movement. In the Directional Movement calculation, Inside Days are consequently not taken into account. It is possible for the directional movement to be zero. This occurs when the current trading range is inside the previous trading range, or when the trading ranges, current versus previous, are equal.