A technical indicator that can indicate the start of a new trend developed by J. Welles Wilder.
The Directional Movement Index (DMI) was developed by J. Welles Wilder and described in his book “New Concepts In Technical Trading Systems”, written in 1978. The index consists of two parts: the Positive Directional Index (+DI) and the Negative Directional Index (-DI). The DX’s main purpose is to help identify equilibrium points in the price movement by measuring true directional movement. The +DI line measures positive (upward) movement while the -DI measures negative (downward) movement.
The DMI in the USD/CAD 1H Chart 4/11/2011
Source: VT Trader
A crossover of the +DI and -DI can indicate a change in trend. Wilder suggested the use of this indicator in combination of others to identify trend and make investment decisions.
Smoothing out the two indicators, Wilder developed a single index in the Average Directional Movement Index (ADX).
