The DMI indicator, also known as the Directional Movement Index or Trend Indicator, is a DMI indicator, also known as the Directional Movement Index, also known as the Directional Movement Indicator or Directional Indicator, which was created by the American technical analysis master Wells Wilder. This is a technical indicator that reflects the trend of stock prices, and it is mainly composed of four curves, namely PDI (+DI) line, MDI (-DI) line, ADX line and ADXR line.
The basic principle of the DMI indicator is to find the function of the stock price to innovate the first or new low price in the process of rising and falling, to judge the long and short forces, and then to seek the equilibrium point between buyers and sellers and the cyclic process of stock price fluctuations under the interaction between the two parties. It is calculated by dividing the absolute value of the difference between +di and -di by the percentage of the sum to get the trend index dx. Due to the relatively large fluctuation range of DX, the average trend indicator ADX is generally calculated by smoothing for a certain period.
The PDI line and MDI line, also known as the positive and negative direction lines of the Trend Indicator or Trend Indicator, are calculated based on the difference between the number of daily stock prices and the number of shares. If the number of *** is more than the number of ***, then the PDI line will go up;Conversely, if the number of *** is more than the number of **, then the MDI line will rise.
The ADX line, also known as the trend average, is an indicator that reflects the strength of the trend of a stock price movement. It is calculated by dividing the absolute difference between PDI and MDI by the percentage of the sum to get the trend index DX, and then smoothing the DX for a certain period to obtain the average trend indicator ADX.
In practice, DMI indicators can help investors judge market trends and guide investment decisions. Here are some specific application principles:
1.When the PDI line breaks through the MDI line from bottom to top, it shows that there are new bulls entering the market, which is a signal to buy;
2.When the PDI line breaks the MDI line from top to **, it shows that there is a new short entry, which is a signal to sell;
3.When the ADX value is consistently higher than the previous day, the market** will maintain the original trend;
4.When the ADX value decreases, falls below 20, and travels sideways, the market sentiment is consolidating;
5.When the ADX value changes from an upward trend to a downward trend, it indicates that a reversal is imminent.
The advantages of DMI indicators are manifested in the following aspects:
1.The DMI indicator contains a daily high and low volatility amplitude factor, which makes the reaction to the market** more accurate
2.The DMI indicator can provide a basis for judging the trend by analyzing the changes in the power balance point of buyers and sellers in the process of rising and falling
3.When the four curves of PDI, MDI, ADX and ADXR are consolidated in a narrow range in a narrow area around 20, if the PDI curve breaks through the MDI, ADX, and ADXR curves upward, and the stock price also breaks through the medium and long-term ** with volume, it means that the main force of bulls in the market is relatively strong, and the stock price will enter a strong rise stage in the short term.
However, there are also some drawbacks to the DMI metric:
1.DMI crossover signals are much slower to respond to the foreign exchange market than other indicators, so they may not be suitable for ** investors;
2.This indicator is more suitable for medium and long-term investors, and may be misleading for ** operations.