# Dynamic Momentum Index (DMI)

The Dynamic Momentum Index is very similar to the Relative Strength Index (RSI). The main difference between the two is that the dynamic momentum index uses different time periods as volatility changes

# Dynamic Momentum Index (DMI)

**Dynamic Momentum Index (DMI)** is a technical indicator used to determine overbought and oversold conditions for a particular stock. The dynamic momentum index was created by Tushar Chande and Stanley Kroll.

## Dynamic Momentum Index Formula

The Dynamic Momentum Index is very similar to the Relative Strength Index (RSI). The main difference between the two is that the dynamic momentum index uses different time periods as volatility changes whereas the RSI uses a fixed number of time periods.

The time interval used in the dynamic momentum index is controlled by recent volatility in the prices of the underlying security. Securities undergoing higher volatility have shorter time periods, while calm securities have longer time periods. There are between three and 30 time periods in the standard dynamic momentum index formula.

## Dynamic Momentum Index Interpretation

Chande and Kroll developed this index because they wanted to avoid the short-term smoothing effects of the RSI. They kept the value returns for the dynamic momentum index similar to the RSI, with readings under 30 showing an oversold condition and readings over 70 being overbought.