Directional Movement Index (DMI)

The Directional Movement Index (DMI) actually consists of two separate indicators:  +DM which measures how strong the upward trend is; and -DM which identifies how strong the downward trend is.

Directional Movement Index (DMI)

The Directional Movement Index (DMI) actually consists of two separate indicators:  +DM which measures how strong the upward trend is; and -DM which identifies how strong the downward trend is. Together, the two indicators can be used to determine the direction and strength of a trend in either the market index or individual stock price. +DI and -DI form the basis of the popular Average Directional Index (ADX) trend indicator.  The Directional Movement Index was developed by J. Welles Wilder in 1978.


Directional Movement Index Calculation

Directional movement is determined by comparing the difference between two consecutive lows with the difference between the highs. The directional movement is positive when the current high minus the prior high is greater than the prior low minus the current low.  The Plus Directional Movement (+DM) then equals the current high minus the prior high, provided it is positive. A negative value would simply be entered as zero.

The directional movement is negative when the prior low minus the current low is greater than the current high minus the prior high. The Minus Directional Movement (-DM) equals the prior low minus the current low, provided it is positive.  A negative value would simply be entered as zero.

Directional Movement Index Interpretation

It is considered to be a bullish crossover when the +DI crosses above the -DI.  Likewise, it is considered to be bearish when the -DI crosses below the +DI.  +DI and -DI tend to have many false indications so they are normally used in conjunction with the Average Directional Movement Index.

The Directional Movement Index tends to have a significant number of crossovers leading to false signals.

The Directional Movement Index tends to have a significant number of crossovers leading to false signals.

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