Directional Movement Index (DMI)
System of +DI and −DI lines measuring upward and downward price movement; the gap between them, normalised as ADX, quantifies trend strength.
Formula
+DM = max(High − Prev High, 0) (if > |Low − Prev Low|); −DM = max(Prev Low − Low, 0) (if > +DM); +DI = 100 × Smoothed(+DM) / ATR; −DI = 100 × Smoothed(−DM) / ATR
The DMI was developed by Welles Wilder as the directional component of his ADX system. +DI captures upward directional movement (today's high − yesterday's high, when positive) and −DI captures downward movement, both smoothed over 14 periods.
When +DI crosses above −DI, a bullish signal is generated; when −DI crosses above +DI, a bearish signal fires. The crossovers on their own can be noisy — pairing them with ADX above 25 filters out false signals in choppy markets. The width of the gap between +DI and −DI indicates how decisively one direction dominates.
Related Terms
Aroon
Trend-detection indicator showing how recently the n-period high and low were set; near-100 Aroon Up signals a strong uptrend.
IntermediateAverage Directional Index (ADX)
Non-directional trend-strength gauge (0–100); readings above 25 indicate a trending market, below 20 suggest a range.
IntermediateAverage True Range (ATR)
Volatility measure averaging the greatest of: current high–low, current high–prior close, or current low–prior close over n periods (default 14).
IntermediateParabolic SAR
Trend-following stop-and-reverse indicator that plots dots above (downtrend) or below (uptrend) price, accelerating as the trend matures.
IntermediateVortex Indicator
Trend indicator measuring upward and downward vortex movement; VI+ crossing above VI− signals a new uptrend, below signals a downtrend.
Intermediate