{"id":2224,"date":"2010-02-04T20:53:07","date_gmt":"2010-02-04T15:23:07","guid":{"rendered":"http:\/\/www.niftylivecharts.com\/blog\/?p=2224"},"modified":"2010-02-04T20:53:07","modified_gmt":"2010-02-04T15:23:07","slug":"directional-movement-index-application-and-chart","status":"publish","type":"post","link":"https:\/\/www.niftylivecharts.com\/blog\/directional-movement-index-application-and-chart\/","title":{"rendered":"Directional Movement Index : Application and Chart"},"content":{"rendered":"

Further calculation of the True range is necessary to calculate the Directional Indicators (+DI and -DI). The true range is always positive. It is defined as the current highest value of the difference among today\u2019s highest price minus today\u2019s lowest price; today\u2019s highest price minus yesterday\u2019s closing price; and today\u2019s lowest price minus yesterday\u2019s closing price. Wilder, the developer of DMI used a constant value of 14 on daily data. His logic for using this value is that it represented an average half-cycle period. When this task is accomplished for the specified interval, you compute the average value of PDI, MDI, and TRUE_RANGE.<\/p>\n

The Plus Directional Movement is now calculated. The sum of the +DI over the observation period is divided by the sum of the True Range over the same period. The calculation of the -DI is analogous. The Directional Movement Index (DI) is calculated by dividing the difference between the +DI and -DI by the sum of both figures. The result is a percentage, with which the extent and\/or intensity or the trend is quantified. By smoothing this DI, an Average Directional Index (ADX) results.<\/p>\n

Important points :<\/strong><\/p>\n

High<\/em>: The Symbol field on which the study will be calculated. The application uses the Aspect “High”.<\/p>\n

Low: The Symbol field on which the study will be calculated. The application uses the Aspect “Low”.<\/p>\n

Close: The Symbol field on which the study will be calculated. The application uses the Aspect “Close”.<\/p>\n

Period<\/em>: The number of bars in a chart. If the chart displays daily data, then period denotes days; in weekly charts, the period will stand for weeks, and so on. The application uses a default of 14.<\/p>\n

The Application :<\/strong><\/p>\n

The DI, Directional Movement Index, is a trend following system. The Average Directional Index, or ADX, determines the market trend. When used with the up and down directional study values, +DI and -DI, the DI is an exact trading system.<\/p>\n

The rules for using the DI are pretty simple. You establish a long position whenever the +DI crosses above the -DI. You reverse that position, liquidate the long position and establish a short position, when the -DI crosses above the +DI.<\/p>\n

In addition to the crossover rules, you must also follow the extreme point rule. When a crossover occurs, use the extreme price as the reverse point. For a short position, use the high made during the trading interval of the crossover. Conversely, reverse a long position using the low made during the trading interval of the crossover.<\/p>\n

You maintain the reverse point, the high or low, as your market entry or exit price, even if the +DI and the -DI remain crossed for several trading intervals. This is supposed to keep you from getting whipsawed in the market.<\/p>\n

\"\"<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Further calculation of the True range is necessary to calculate the Directional Indicators (+DI and -DI). The true range is always positive. It is defined as the current highest value of the difference among today\u2019s highest price minus today\u2019s lowest price; today\u2019s highest price minus yesterday\u2019s closing price; and today\u2019s lowest price minus yesterday\u2019s closing […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[2261,6054,6055],"class_list":["post-2224","post","type-post","status-publish","format-standard","category-general","tag-directional-movement-index","tag-directional-movement-index-application","tag-directional-movement-index-chart","entry","has-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/2224","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/comments?post=2224"}],"version-history":[{"count":0,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/2224\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/media?parent=2224"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/categories?post=2224"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/tags?post=2224"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}