Filtering DMI Crossovers with the Detrended Price Oscillator

Summary

This strategy uses crossovers between the positive and negative Directional Movement Index lines to signal direction, then requires the Detrended Price Oscillator to agree. A positive DPO is required for a long entry after +DI crosses above -DI; a negative DPO is required for a short entry after +DI crosses below -DI. The implementation uses a 34 period DI lookback and a 34 period DPO setting, with an option to center the oscillator. ADX is omitted, despite its usual role in measuring trend strength.

The document presents DPO sign agreement as a way to avoid some crossover signals during range bound conditions, and recommends stops, parameter testing, additional indicators, and adaptive settings. It gives a BTC/USDT futures test configuration spanning about a year but provides no outcome metrics. DPO sign alone does not establish that a durable trend exists, and crossovers may lag or fail; the proposed reduction in false trades and improved reliability should therefore be treated as hypotheses to test after fees and slippage.

Key ideas

• A +DI crossover above -DI is considered for a long only when DPO is positive.
• A +DI crossover below -DI is considered for a short only when DPO is negative.
• The implementation excludes ADX and applies a 34 period lookback to both indicator components.
• The DPO filter is intended to screen some range bound signals, but its effectiveness is not quantified.
• The published futures test setup contains no performance results, and costs and false signals remain relevant risks.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.