ADX/DMI

Average Directional Index/Direction Movement Indicator

The Average Directional Index/Direction Movement Indicator chart study contains three lines at the bottom of the graph. These are: a positive direction indicator (+DI), a negative direction indicator (-DI) and an average directional movement indicator (ADX).

How are these calculated?

The +DI line is the average of the moves towards higher prices, that is the Exponential Moving Averages (EMA) of the one periods high, minus the last periods high, or zero if the stock isn't moving upwards. It tracks how (if at all) fast the stock is moving upwards.

Similarly the -DI line, is the EMA of one periods low minus the last periods low, providing the stock is moving downwards. It tracks how (if at all) slow the stock is moving downwards.

The ADX line is the EMA of the positive difference between the two directional indictors, divided by there sum. It tracks how strong the direction of the market is.

You can change the selected period used for the moving averages, and you can also switch on and off the drawing of each of the three lines.

Parameters: Period, show either ADX, and/or DM+ and/or DM-.

For additional help on what the different parameters mean, that isn't included on this page, click here.

Average Directional Index/Direction Movement Indicator

Here is an example of the ADX/DMI chart study (on a London Stock Exchange graph)

Reading the study:

Trading signals are marked on the chart when the following arise:

Buy, signalled with a green upward mark, when ADX rises while +DI is above -DI, provided the ADX started below -DI. Exit signalled with a blue cross, when ADX falls or -DI rises above +DI.

Sell, signalled with a red downward mark, when ADX rises while -DI is above +DI, provided the ADX started below +DI. Exit signalled with a Blue cross, when ADX falls or +DI rises above -DI.

Reading the study:

Here is an example of the ADX/DMI and the price line (of the London Stock Exchange), and what it may indicate