This is a follow-up to my above post #285 on 17/6/24 Re the “
DrB 3 Indicators”…..
In that post I mentioned 2 areas that this post will address….
The first was where I said, “There are other Signals given by the 3 Indicators, such as”….
And then, “There are also numerous other signals that can be observed on a Chart”….
So, to expand on those 2 statements I submit the following:-
To start with, let’s just look at how those 2 highlighted statements help or hinder the DMI….
The DMI gives several Entry/Exit Signals as set out in the snapshot below….
View attachment 178866
The above Snapshot does not list the following:-
The DMI indicator is made up of three plots; the difference between today's high and yesterday's high is the up movement or D+, the difference between today's low and yesterday's low is the down directional movement or D-. Finally, the ADXR (Directional Index) is calculated by taking the averages of the D+ and the D- and dividing them by the average true range.
Suggested terms are 13 or 14…. HOWEVER, after many years back-testing the DMI I found that a term of 7 works best for me….
Remember that
People usually read all about Indicators, that's great, but what people need to do is spend a lot of time STUDYING Indicators, reading will give you the basic's, as a trader you need more than just the basic's, just because a book suggests to you that, for example, O'bought & O'sold lines are set at a particular level, it does not make that suggestion correct or incorrect, it's just a guide, a reference point, a starting point, nothing is 'set in concrete' - look at the Indicator Formulas, understand them, understand what the Indicator uses to calculate it's individual 'End Point' - use that understanding to gain an advantage over other traders.... Don't get me wrong here - by all means use the Normally Accepted Settings to start with, then as you become more proficient, expand your horizons, experiment with different terms and settings.
A rising ADXR, with both the ADXR and D+ above the D- indicates a strengthening bullish market.
A rising ADXR, with both the ADXR and D- above D+ indicates a strengthening bearish trend.
If the ADXR has been below both D+ and D- but has begun to rise, a new market trend is emerging.
A Declining or Low ADXR shows that the market is losing its direction.
When ADXR falls below both D+ and D- it signals a lifeless market.
Do not trade with DMI until ADXR has clearly turned off the bottom.
Wait until ADXR rises 4 steps off its low (ie: 15 is its low point).
The longer that ADXR has remained below both D+ and D- the stronger the subsequent trend is likely to be.
When ADXR rises above both D+ and D- it signals that the market is becoming overheated. Take profits when ADXR turns down from above D+ and D-.
The ADXR is a component of the DMI.
The ADXR can be used as a filter with other indicators.
Remember, a low ADXR indicates a sideways market.
A rising ADXR indicates a strong trend, and a flat or falling ADXR indicates the trend may be failing.
Suggested term = 13….. HOWEVER, after many years back-testing the DMI I found that a term of 7 works best for me….
View attachment 178867
Very Basically, when you look at the DMI and its 3 Lines, all you need to do is relate the configuration of the 3 lines to the actual SP for that same period – on the chart above, for the period from 20/9/23 to 3/11/23 you will see that the DMI shows RED & BLUE Lines are ABOVE the GREEN and the SP has Pulled Back considerably….
Now look at the period 3/11/23 to 11/1/24 where you will see that the DMI shows GREEN & BLUE Lines ABOVE the RED and the SP has Risen substantially….
Now look at the period from about 28/2/24 to today 17/6/24 where you will see that the 3 DMI Lines are bunched together, at what I would call Mid Range, and the SP has been Trending Sideways for that entire period….
Note that the period from 11/1/24 to 28/2/24 the DMI gave a few "Non-descript Mixed Signals"….
Cheers..
DrB.