In the toolkit of technical analysis, the DMI indicator is highly regarded by traders for its unique ability to quantify trends. Many people are aware of its existence but are unclear about how to effectively utilize it in actual trading. This article approaches from a practical perspective, guiding you to understand the core logic and application skills of this system.
Core Components and Operating Principles of the DMI Indicator
The DMI indicator (Directional Movement Index), developed by Welles Wilder in 1978, is a trend judgment system composed of three lines.
Among them, the +DI line represents the strength of the upward direction — it measures the increase in price compared to previous periods for each K-line. When this line rises, it indicates that buyers are in control. Conversely, the -DI line tracks the strength of the downward direction; when it moves higher, it signifies increasing selling pressure. The ADX line's role is to measure the overall strength of the trend itself —