QUICK INFO: Indicator shows buyers & sellers activity and strength and tells if the underlying asset is trending or not. For the most part it is used for trend predictions.
Directional movement index is displayed with two curves - green showing the strength of the buyers and red showing the strength of the sellers. ADX curve which can be applied onto the DMI indicator is so called average directional movement index and is basically the moving average of DMI indicator. DMI speed is defined with period setting, and the common settings for DMI period are level 14 or 15. If the ADX is above certain level (for example above 40 on 15 period setting) we can expect a trend development. If the ADX is below level 20 for example, we are looking at non-volatile market.
DMI and ADX can be used in different ways and is most useful whenever we need to analyze if the market is trending or not, or to predict the occurrence of future trends. DMI can be used as additional indicator with the Algobit Signals Strategy, as explained in the video, or with 5 Minute Trading Strategy as a help to avoid trending markets, for example.
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