Using DMI Directional Indicators to Read Price Direction

Summary

The document explains how the plus and minus directional indicators, +DI and -DI, form part of Wilder’s Directional Movement Index. Unlike ADX, which measures the strength of a move without indicating its direction, these lines compare upward and downward price movement over a chosen period. Their calculation focuses on parts of each bar’s range that extend beyond the prior bar, normalizes those movements by true range, and averages them over time.

A +DI move above -DI suggests upward movement has gained relative strength; a move below it suggests downward pressure or weakening upward momentum. Line crossings may signal a potential change in direction or trend. The document also says the DSL version can support both trend and countertrend trading and add information about momentum strength. It provides no tested rules, performance evidence, or guidance on confirmation and risk controls, so crossings should be treated as indicators to investigate rather than validated trade signals.

Key ideas

• +DI and -DI represent the relative direction of price movement, while ADX measures strength without direction.
• The directional components use movement beyond the previous bar’s range, normalized by true range and averaged over time.
• A +DI crossing above -DI indicates stronger positive direction, while a crossing below indicates stronger negative direction.
• Crossings may point to a possible trend change, but the document supplies no performance validation.
• The DSL version is described as usable in trend and countertrend approaches and as an aid to momentum assessment.

Tags

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