What Is the Colored Directional Movement Index (CDMI)?
The Directional Movement Index, or DMI, is an indicator developed by J. Welles Wilder that identifies the direction of the price movements and the trend strength. DMI is a collection of three separate indicators (ADX, +DI, -DI) combined into one
ADX's purposes is to define whether or not there is a trend present and the other two indicators ( +DI and -DI ) serve the purpose of determining trend direction. By combining all three, a technical analyst has a way of determining and measuring a trend's strength as well as its direction
What to look for :
Trend Strength - Analyzing trend strength is the most basic use for the DMI.
Crosses : When +DI is above -DI, there is more upward pressure than downward pressure in the price. If -DI is above +DI, then there is more downward pressure in the price
DMI can provide quality information and even trading signals, but it is not an easy indicator to master and not easy to read within multiple lines
Here comes Colored Directional Movement Index (CDMI)
CDMI is still the same indicator but visualized on the top of the price chart with single line of coloured triangles. CDMI requires additional setting to be provided by user which are Strong Trend and Week Trend threshold levels. Wilder believed that a DMI reading above 25 indicated a strong trend, while a reading below 20 indicated a weak or non-existent trend. Hence the default values for strong trend is set to 25 and week trend set to 17
How to read CDMI, it is simply to read colours and shapes of the triangles
Tringle Shapes indicates the direction of the move and are calculated by comparing the values of +DI and -DI
triangle up shape when +DI is above -DI (+DI > -DI)
triangle down shape when +DI is below -DI (+DI < -DI)
Triangle Colours, there are four main colours:
Strong Bullish : Green is printed when ADX value is bigger than the Strong Trend Threshold +DI is above -DI (ADX > StrongThesh and +DI > -DI)
Strong Bearish : Red is printed when ADX value is bigger than the Strong Trend Threshold +DI is below -DI (ADX > StrongThesh and +DI < -DI)
Weak Trend : Black is printed when ADX value is lower than the Strong Trend Threshold and bigger than Week Trend Threshold ( ADX > WeekThesh and ADX < StrongThesh)
Even Weaker Trend : Yellow is printed when ADX value is lower than the Week Trend Threshold ( ADX < WeekThesh)
Additionally, Intensity changes of colours (between light and dark) will allow you to follow how ADX value is changing comparing it to its previous values.
If current value of ADX is bigger than the previous value of ADX a dark colour will be printed, otherwise when ADX value decrease a lighter colour will be printed
Please check links below for different usages of CDMI
Hope you enjoy this post and find it useful
The Directional Movement Index, or DMI, is an indicator developed by J. Welles Wilder that identifies the direction of the price movements and the trend strength. DMI is a collection of three separate indicators (ADX, +DI, -DI) combined into one
ADX's purposes is to define whether or not there is a trend present and the other two indicators ( +DI and -DI ) serve the purpose of determining trend direction. By combining all three, a technical analyst has a way of determining and measuring a trend's strength as well as its direction
What to look for :
Trend Strength - Analyzing trend strength is the most basic use for the DMI.
Crosses : When +DI is above -DI, there is more upward pressure than downward pressure in the price. If -DI is above +DI, then there is more downward pressure in the price
DMI can provide quality information and even trading signals, but it is not an easy indicator to master and not easy to read within multiple lines
Here comes Colored Directional Movement Index (CDMI)
CDMI is still the same indicator but visualized on the top of the price chart with single line of coloured triangles. CDMI requires additional setting to be provided by user which are Strong Trend and Week Trend threshold levels. Wilder believed that a DMI reading above 25 indicated a strong trend, while a reading below 20 indicated a weak or non-existent trend. Hence the default values for strong trend is set to 25 and week trend set to 17
How to read CDMI, it is simply to read colours and shapes of the triangles
Tringle Shapes indicates the direction of the move and are calculated by comparing the values of +DI and -DI
triangle up shape when +DI is above -DI (+DI > -DI)
triangle down shape when +DI is below -DI (+DI < -DI)
Triangle Colours, there are four main colours:
Strong Bullish : Green is printed when ADX value is bigger than the Strong Trend Threshold +DI is above -DI (ADX > StrongThesh and +DI > -DI)
Strong Bearish : Red is printed when ADX value is bigger than the Strong Trend Threshold +DI is below -DI (ADX > StrongThesh and +DI < -DI)
Weak Trend : Black is printed when ADX value is lower than the Strong Trend Threshold and bigger than Week Trend Threshold ( ADX > WeekThesh and ADX < StrongThesh)
Even Weaker Trend : Yellow is printed when ADX value is lower than the Week Trend Threshold ( ADX < WeekThesh)
Additionally, Intensity changes of colours (between light and dark) will allow you to follow how ADX value is changing comparing it to its previous values.
If current value of ADX is bigger than the previous value of ADX a dark colour will be printed, otherwise when ADX value decrease a lighter colour will be printed
Please check links below for different usages of CDMI
Hope you enjoy this post and find it useful
