Directional Movement System
Posted by Mohammad Rahhal on 20 February 2012 04:34 PM

The Welles Wilder's Directional Movement System contains five indicators; ADX, DI+, DI-, DX, and ADXR.

The ADX (Average Directional Movement Index) is an indicator of how much the market is trending, either up or down: the higher the ADX line, the more the market is trending and the more suitable it becomes for a trend-following system. This indicator consists of two lines: DI+ and DI-, the first one being a measure of uptrend and the second one a measure of downtrend.

Detailed information about this indicator and formulas can be found in Welles Wilder's book, "New Concepts in Technical Trading Systems".
The standard Directional Movement System draws a 14 period DI+ and a 14 period DI- in the same chart panel. ADX is also sometimes shown in the same chart panel.

A buy signal is given when DI+ crosses over DI-, a sell signal is given when DI- crosses over DI+.

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