What is the Directional Movement Index (DMI): A chart indicator used in the technical analysis of financial markets. Its primary purpose is to indicate the directional strength of price trends.
Category: Technical analysis indicator
How is the Directional Movement Index (DMI) Used: The DMI aids in assessing the direction and strength of price trends for a security or market. Crossovers between the two main lines (+DI and -DI) are typically used as trading signals to buy or sell. The greater the spread between these two lines, the stronger the trend may be in a given direction. The Average Directional Index (ADX) is a third line that can be added to the DMI to give an overall picture of trend strength.
What Does the Directional Movement Index (DMI) Consist of: The DMI compares prior highs and lows and draws two lines: a positive directional movement line (+DI) and a negative directional movement line (-DI). A third line (ADX) indicates the difference between the two other lines. When the +DI is above -DI, there is more upward pressure than downward pressure in price. If -DI is above +DI, then there is more downward pressure in price.
What Does the Directional Movement Index (DMI) Look Like:
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