Directional Movement Index

This indicator allows you to capture the actual trend component characterizing a historical series, also measuring its intensity. Differently from the RSI, the Directional Movement System foresees the use of a greater number of data related to the historical series: in addition to the CLOSE prices, it requires the HIGH and LOW prices registered in the selected periods. It must be said that the system makes use of the interaction of three indicators: DI +, which indicates the bullish component of the time series movement, DI-, which indicates its bearish component, and DX (or ADX), indicating the directional intensity of the investigated series. The range of possible values, taken by the three indicators, ranges from 0 to 100.

Considering a standard domain of 14 periods for the calculation of the three indicators (indicated by the inventor Welles Wilder), values of the DX curve (or better ADX) above the critical threshold 20 signal the exit of the stock exchange dynamics from a congested phase and the start of a well-defined trend movement.

In the case ADX and DI + have an increasing trend against a declining movement of the DI-, the system expresses the intensification of a bullish trend, while in the case of ADX and DI- they have an increasing trend against a declining movement of DI + the system expresses the intensification of a bearish trend. If the ADX has a lateral or slightly decreasing trend, while DI + and DI- tend to converge, the system shows the start of a congestion phase: a decreasing ADX and the crossing of the DI + and DI- (DI → DI +) confirm a distribution or redistribution, the crossing of the curves DI + and DI- (with DI + & gt; DI-) and an ADX in decline confirm an accumulation or re-accumulation phase.