Strength & Directional Movement [CP]
This my version of the ADX & DI indicator, fixed the code, ported to Pine Script v3 and loaded up with filters for your smoothing pleasure.
I have some info below on how to read this indicator, be sure to take a look!
Wilder’s DMI (ADX) consists of three indicators that measure a trend’s strength and direction.
Three lines compose the Direction Movement Index (DMI): ADX (black line), DI+ (green line) and DI- (red line).
The Average Directional Index (ADX) line shows the strength of the trend. The higher the ADX value, the stronger the trend.
According to Wilder, a trend is present when the ADX is above 25. DMI values range between zero and 100.
The Positive Directional Indicator (+DI) and Negative Directional Indicator (-DI) show the current price direction.
When the DI+ is above DI-, current price momentum is up.
When the DI- is above DI+, current price momentum is down.
DI Crossovers:
Traders could enter a long position when the DI+ line crosses above the DI- line and set a stop-loss order under the current day’s low.
When the DI- line crosses above the DI+ line, traders could place a short position with a stop above the high of the current day.
Irrespective of whether the trader takes a long or short position, the ADX should be over 25 when the crossover occurs to confirm the trend’s strength.
When the ADX is below 20, traders should use trading strategies that exploit range bound conditions
DI Contractions and Expansions:
The DI+ and DI- line move away from each other when price volatility increases and converge toward each other when volatility decreases.
Short-term traders could enter trades when the two lines move apart to take advantage of increasing volatility.
Swing traders might accumulate into a position when the lines contact in anticipation of a breakout.
The +DI generally moves in sync with price, which means the +DI rises when price rises, and it falls when price falls.
It is important to note that the -DI behaves in the opposite manner and moves counter-directional to price.
The -DI rises when price falls, and it falls when the price rises. This takes a little getting used to.
Just remember that the strength of a price move up or down is always recorded by a peak in the respective DMI line.
Reading directional signals is easy. When the +DI is dominant and rising, price direction is up.
When the -DI is dominant and rising, price direction is down. But the strength of price must also be considered.
DI strength ranges from a low of 0 to a high of 100. The higher the DI value, the stronger the prices swing.
DI values over 25 mean price is directionally strong. DI values under 25 mean price is directionally weak.
I have some info below on how to read this indicator, be sure to take a look!
Wilder’s DMI (ADX) consists of three indicators that measure a trend’s strength and direction.
Three lines compose the Direction Movement Index (DMI): ADX (black line), DI+ (green line) and DI- (red line).
The Average Directional Index (ADX) line shows the strength of the trend. The higher the ADX value, the stronger the trend.
According to Wilder, a trend is present when the ADX is above 25. DMI values range between zero and 100.
The Positive Directional Indicator (+DI) and Negative Directional Indicator (-DI) show the current price direction.
When the DI+ is above DI-, current price momentum is up.
When the DI- is above DI+, current price momentum is down.
DI Crossovers:
Traders could enter a long position when the DI+ line crosses above the DI- line and set a stop-loss order under the current day’s low.
When the DI- line crosses above the DI+ line, traders could place a short position with a stop above the high of the current day.
Irrespective of whether the trader takes a long or short position, the ADX should be over 25 when the crossover occurs to confirm the trend’s strength.
When the ADX is below 20, traders should use trading strategies that exploit range bound conditions
DI Contractions and Expansions:
The DI+ and DI- line move away from each other when price volatility increases and converge toward each other when volatility decreases.
Short-term traders could enter trades when the two lines move apart to take advantage of increasing volatility.
Swing traders might accumulate into a position when the lines contact in anticipation of a breakout.
The +DI generally moves in sync with price, which means the +DI rises when price rises, and it falls when price falls.
It is important to note that the -DI behaves in the opposite manner and moves counter-directional to price.
The -DI rises when price falls, and it falls when the price rises. This takes a little getting used to.
Just remember that the strength of a price move up or down is always recorded by a peak in the respective DMI line.
Reading directional signals is easy. When the +DI is dominant and rising, price direction is up.
When the -DI is dominant and rising, price direction is down. But the strength of price must also be considered.
DI strength ranges from a low of 0 to a high of 100. The higher the DI value, the stronger the prices swing.
DI values over 25 mean price is directionally strong. DI values under 25 mean price is directionally weak.