Directional Trend Index
The original Analysis Toolbox articles discussed the various market cycles including trends and continuations. This part of the The Trader’s Indicator Series focuses on the Indicator Toolbox, as we will discuss various indicators that are found on most trading platforms. We will discuss the indicator in the context of the chosen market, and if it resonates with you, please continue to do your own analysis with it. Trading successfully is all about feeling comfortable with a methodology and using that system repeatedly even when boredom sets in. I will be discussing indicators in alphabetical order that can be found on the MotiveWave platform and this wek it is the turn for the Directional Trend Index . (for a free 2-week trial CLICK HERE)
Directional Trend Index (DTI)
The Directional Trend Index (DTI) is a good indicator for those traders who want to assess strong trends and enter when these trends are strong with increasing momentum. Just like other indicators, DMI can be applied to any market and time frame, although it was created by William Blau to address those stocks in the S&P500.
DTI has the same characteristics of an oscillator in terms of looking for overbought and oversold conditions. Adjustable guides on the indicator are given to fine tune the signals. The user may change the method (EMA), period lengths and guide values. The standard settings use 5, 10 and 14 EMAs in the calculations.
By adjusting the top and bottom guides, you can control the quantity and quality of the trading signals. DTI values above 25 are considered to be overbought and therefore offer an opportunity to sell. DTI values below -25 are considered oversold and present an opportunity to buy. If the DTI peaks above the top guide a sell signal will be generated. Conversely, if the DTI troughs below the bottom guide, a buy signal will be given. The zero line divides the bulls (above) from the bears (below).
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