24 basic indicators (13) -- DMI

Trend indicator-DMI indicator

DMI indicators are also called trend indicators or trend indicators. Their full names are "directional movement index, or DMI". They are also the American technical analysis master Wells? Wells Wilder is a medium-and long-term stock market analysis method.

Section 1 principles and calculation methods of DMI indicators

I. Principles of DMI indicators

DMI is used to analyze the changes in the balance between buyers and sellers in the stock price rise and fall process, that is, the change in the power of both sides is affected by price fluctuations and a cyclical process from balanced to unbalanced occurs, thus providing a technical indicator for judging the trend.
The basic principle of the DMI index is to find the function of innovating high prices or new low prices in the stock price rise and fall process, and to determine how far it is from being powerful, then we seek a balance point between buyers and sellers and a cyclical process in which the stock price fluctuates under the interaction of both parties. In most indicators, most of them calculate different analysis data based on the trend of the closing price of each day and the progressive increase/decrease count, the disadvantage is that it ignores the fluctuation amplitude between the height and height of each day. For example, the two-day closing price of a stock may be the same, but the fluctuation in one day is not large, but the share price on the other day is more than 10%, the analysis significance of the two-day market trend is definitely different, which is hard to show in most other indicators. The DMI index is to calculate the daily fluctuations, so as to more accurately reflect the trend of the market and better predict the future development and changes of the market.

Ii. Calculation of DMI indicators

The calculation method and process of DMI indicators are complex. It involves several calculation indicators, such as DM, TR, dx, and + DI (PDI, the same below) and-di (I .e., MDI, the same below) calculation of four judgment indicators, including ADX and adxr.
1. Basic computing program
Taking daily DMI calculation as an example, the basic program for calculation is as follows:
(1) Compare the highest price, lowest price, and closing price produced by daily stock price fluctuations according to certain rules, and calculate the true volatility of daily stock price fluctuations TR, + DI,-Di, accumulate the value based on a certain number of days for the TR, + DM, and DM values on the N day.
(2) divide the rising and falling trend values in N by the true fluctuation values in N days, and then obtain the rising index + DI and dropping indicator-DI in N days.
(3) The daily trend value dx is calculated based on the ratio of the increase indicator + DI and the drop indicator-DI in N.
(4) accumulate DX by a certain number of days and calculate the average trend value ADX within n days.
(5) then, the ADX of the current day is compared with the ADX of the previous day to calculate the ADX evaluation value adxr.
2. Specific computing process
(1) Calculate the daily trend value
The daily trend value of the trend index can be divided into three situations: rising trend, falling trend, and no trend. The daily trend value can only be one of the three situations.
A. rising trend (+ DM)
+ DM indicates the value of positive trend change, that is, the value of rising trend. The value is equal to the highest price of the Day minus the lowest price of the previous day. The rising trend value must be greater than the lowest price of the current day minus the absolute value of the lowest price of the previous day. Otherwise, + DM = 0.
B. decline (-DM)
-DM indicates the negative trend change value, that is, the downward trend value, which is equal to the lowest price of the Day minus the lowest price of the previous day. The descent trend value must be greater than the maximum price of the current day minus the absolute value of the lowest price of the previous day. Otherwise,-dm = 0.
C. No trend
If there is no trend, the current trend value is "zero", that is, the + DM and-DM of the current day are both equal to zero. There are two kinds of stock price fluctuations that may not change. First, Dangdang's highest price is lower than the highest price of the previous day and the lowest price of the current day is higher than the lowest price of the previous day. Second, when the rising value is equal to the descending value.
(2) Calculating the true amplitude (TR)
Tr represents the actual fluctuation, which is the biggest change of the price of the current day compared with the previous day. The maximum value (absolute value) of the values of the following three differences is the real fluctuation of the current day:
A. the difference between the highest price of the day and the lowest price of the day.
B. The difference between the highest price of the day and the closing price of the previous day.
C. The lowest price of the Day minus the price difference of the previous day.
TR is the value between A, B, and C.
(3) computing Direction Line di
The direction-line Di is an indicator to measure the rise or fall of stock prices. It can be divided into "rising indicators" and "Falling indicators ". In some stock market analysis software, + DI represents the upward direction, and-di represents the downward direction. The calculation method is as follows:
+ DI = (DM sort TR) × 100
-DI = (-DM limit TR) × 100
To make the Direction Line have reference value, you must use the principle of smooth moving average to accumulate the operation. Take the 12-day calculation cycle as an example. First, the + DM,-DM, and TR values in the 12-day period are averaged. The obtained values are + dm12,-dm12, and tr12, respectively, as follows:
+ DI (12) = (+ dm12 127tr12) × 100
-Di (12) = (-dm12 127tr12) × 100
When + di12,-di12, or tr12 is calculated for the second day, you only need to use the smooth moving average formula.
For example:
Tr12 of the current day = 11/12 Tib tr12 of the previous day + Tr of the current day
The value of the rising or falling direction is always between 0 and 100.
(4) ADX
The DX index value can be calculated based on the Di value. The calculation method is to divide the absolute value of the difference between + DI and-di by the percentage of the sum to obtain the trend index dx. Due to the large fluctuation amplitude of DX, the average trend indicator ADX is usually obtained through smooth calculation in a certain period. The specific process is as follows:
DX = (di DIF ÷ di sum) × 100
Di DIF is the absolute value of the price difference between the increase and decrease indicators.
Di sum is the sum of metrics for increase and decrease.
ADX is the moving average value of N in a certain period of DX.
(5) Calculation and evaluation value adxr
You can also add adxr to DMI indicators to facilitate the analysis and determination of quotations.
The adxr formula is as follows:
Adxr = (ADX of the current day + ADX of the previous day) limit 2
Similar to the calculation of other indicators, the selected calculation cycle is different, DMI indicators include daily DMI indicators, weekly DMI indicators, monthly DMI indicators, and minute DMI indicators. The daily DMI and weekly DMI indicators are often used for stock market research. Although their values are different during calculation, the basic calculation method is the same. In addition, with the development of software analysis technology in the stock market, investors only need to master the basic principles and calculation methods formed by DMI, and do not need to calculate the index value, more importantly, DMI indicators are used to analyze and determine stock quotations.

Section 2 DMI indicators general judgment criteria

DMI indicators are a set of technical analysis tools that are considered to be of great success and practical use by Verd. Although the computing process is cumbersome, the use of technical analysis software can save investors from complicated computing processes, focus on understanding the true meaning of the indicators and the unique functions of the indicators.
Different from other technical indicators, DMI indicators mainly determine market trends. In terms of application, DMI indicators are mainly determined in two aspects. One is to analyze the relationship between rising indicators + DI and declining indicators-Di and average trend indicators ADX, the other aspect is the determination of the trend and feature of the market. Among them, the trend relationship between the + DI and-di curves is the signal to determine whether the business can be purchased or sold, and ADX is the signal to determine the future development trend of the market.

I. Evaluation and Determination of rising indicators + DI and descent indicators-Di

1. When the stock price increases and + DI breaks through-di from the bottom, it indicates that many new buyers are on the market. This is a buying signal. If ADX is on the rise, it indicates that the rise of the stock price may be stronger.
2. When the stock price goes down and di breaks down from top to bottom, it indicates that the market's short-selling force is strengthening. This is a sell signal. If ADX declines along with it, it indicates that the decline will increase.
3. When the stock price maintains a certain increase or decrease, the cross-breakthrough signal between + DI and-Di is more accurate, but when the stock price is maintained in the consolidation, sales signals sent from + DI and-DI should be considered invalid.

Ii. Analysis and Determination of average trend indicator ADX

ADX is the average of the trend value dx, while dx is the percentage calculated based on the difference between the + DI and-di values and the comparison. Therefore, the ADX index can be used to determine the market trend more effectively.
1. Judge the market trend
When the market trend increases, the ADX value increases progressively. Therefore, when the ADX value is higher than the previous day, you can determine that the current market is still maintaining the original upward trend, that is, the stock price will continue to rise. If + DI and-di increase at the same time, it indicates that the current upward trend will be very strong.
When the market trend develops downward, the ADX value will decrease continuously. Therefore, when the ADX value is lower than the previous day, you can judge that the current market is still maintaining the original downward trend, that is, the stock price will continue to decline. If + DI and-di decrease at the same time, the current decline will continue.
2. Determine whether the market is consolidating
The ADX value decreases slightly when the market is in a certain region. When the ADX value falls below 20 and is moving horizontally within a narrow range, it can be judged that the market is full, the rising or falling trend is unclear, investors should focus on the wait-and-see, you cannot buy or buy a stock based on the Cross signal of + DI and-di.
3. Determine if the market is turning
When the ADX value changes from rise to fall, it indicates that the market is about to reverse. In the upward trend, ADX changes from rising to falling at a high point, indicating that the upward trend is coming to an end. In the downward trend, ADX falls from a high point, indicating that the downward trend may stop.

Section 3 Special Analysis Methods of DMI indicators

The general analysis method of DMI indicators is mainly aimed at the relationship among the three values, namely + DI,-Di, and ADX. In most stock market technical analysis software, DMI indicators have special analysis and determination functions, including surround + DI line (white line),-di line (yellow line), ADX line (Red Line), and adxr Line (Green Line) the relationship between the same-line and four-line networks, the modification of DMI Index analysis parameters, and the principle of Moving Average first are carried out. In some software, the + DI line is represented by the PDI line, indicating the upward line, and the-di line is represented by the MDI line, indicating the downward line.

Principle of line 1 and Line 4 crossover

1. When the + DI line is in both ADX and adxr lines and below-di lines (especially below 50 lines), it indicates that the market is in a weak market, the downward running trend of the stock market has not changed yet, and the stock price may fall further. Investors should hold the currency to watch or sell stocks at rallies, rather than buying stocks easily. This is the focus of DMI index determination.
2. When the + DI line and the-di line are less than 50 at the same time, if the + DI line quickly breaks through the-di line, it indicates that the new main force has entered the market and the share price will soar in the short term. If a large volume of transactions is released, the market will be more confirmed, and investors should quickly buy stocks in the short term.
3. When the + DI line breaks through the-di line (that is, the-di line breaks through the + DI line from the bottom up, at this time, no matter where + DI and-di are, it indicates that the stock price will fall, and investors should sell stocks in the short term or take a hold on the coin.
4. When the + DI line,-di line, ADX line, and adxr line and other four lines are twisted under 50 lines at the same time in a narrow horizontal movement, it indicates that the market is in a bad situation, the stock price is in the horizontal arrangement. Investors Should Pay Attention to currency holding.
5. When the + DI, ADX, and adxr lines are located below 50 lines at the same time, the three lines are rapidly spreading up and down, which indicates that the market is very popular, the stock price is on the rise, and investors can buy at a low price or hold shares to rise. (This is because the-di line is the downward direction line, which does not respond to the rising trend, so it is not considered ).
6. For bull stocks, ADX turned downward at more than 50 and only fell between 40 and 60. Then, it turned around and climbed up again, and the stock price went out of the horizontal layout during this period. As ADX rebounded again, the stock price rose up again, which is a sign of the rise of the stock price. This often occurs in some of the surging bull stocks. At this time, the DMI indicator is only a reference for the upcoming general trend. In practice, it is necessary to combine the moving average system with the average volume line and other indicators for analysis and determination.

Section 4 practical skills of DMI indicators

The practical skills of DMI indicators mainly focus on the intersection of the four DMI indicators PDI, MDI, ADX, and adxr, as well as the position and Operation direction of the PDI curve (note: the PDI curve and MDI curve on analyticdb are the + DI curve and-di curve on software such as Qianlong ). The following uses the DMI indicator with the daily parameter () of analyticdb as an example to demonstrate the sale and wait-and-see functions of DMI indicators. (Note: The 42-day metric parameters of Qianlong software correspond to those of analyticdb, and are used in the same way ).

I. Sales Functions

1. When the four curves PDI, MDI, ADX, and adxr In The DMI indicators are in a narrow area near 20, if the PDI curve breaks through the MDI, ADX, and adxr curves successively, and the stock price also goes beyond the medium-and long-term moving average, it means that the dominant position in the market is strong, in the short term, the stock price will enter the strong rise phase, which is a buying signal from the DMI indicator. As shown in figure (8-1.
2. When the four curves PDI, MDI, ADX, and adxr In The DMI indicators are arranged in a wide manner between 20 and 40, if the PDI curve falls below the ADX and adxr curves successively, investors should pay close attention to whether the market will reverse down. Once the PDI curve falls below the MDI curve and the stock price also breaks through the medium-and long-term average, it means that the market is strong, the stock price will fall in a short period of time, which is a sell signal from the DMI indicator. (8-2.

Ii. Currency Ownership Function

1. When the PDI curve in the DMI indicator breaks through the MDI, ADX, and adxr respectively, it has been running on these three curves. At the same time, the stock price also rises upwards based on the medium-and long-term moving average, this means that the market is still dominant, and the stock price will rise. This is a signal that the DMI index is obvious, as long as the PDI curve does not fall below any of the three curves, investors can firmly hold their shares to stay up. (8-3.
2. After the PDI curve in the DMI indicator breaks through the MDI, ADX, and adxr respectively, if the PDI curve falls below the ADX curve but receives support at the adxr after a period of high consolidation, and re-adjust the head upstream, also in the middle of the moving average near the support, it indicates that the market is strong, the stock price will continue to rise, this is also the DMI index shareholding signal, investors can also be short-term shareholding to rise. (8-4.
3. When the PDI curve in the DMI indicator falls below the MDI, ADX, and adxr, if the PDI curve is always running below these three lines and horizontally or downward in the area below 20, at the same time, when the stock price is suppressed by the medium-and long-term average, it means that the market's short position is an absolute advantage and the stock price will continue to fall. This is a clear currency holding signal of DMI indicators, as long as the PDI curve does not go above any of these three curves, investors should firmly hold on to the coin. (8-5.
4. When the PDI curve in the DMI indicator falls below the MDI, ADX, and adxr, if the PDI curve remains below these three lines and the stock price is still suppressed by the medium-and long-term average, this means that the market share is still strong, and the share price will fall. This is the currency holding signal of DMI indicators. As long as the DMI curve does not fully break through these three curves, investors should also take the currency holding watch.