Welcome to the Investors Trading Academy talking glossary of financial terms and events.
Our word of the day is “Directional Movement Index”
Directional Movement Index is an indicator developed by Welles Wilder, based on a scale
between 0 to 100, which rate whether a particular financial instrument is experiencing a trend
or not.
Using this index can help you accurately make trades in the currency markets.
DMI is not to be confused with ATR as they both measure momentum.
DMI and ADI are similar indicators.
ADX is an indicator used in technical analysis as an objective value for the strength of
trend.
ADX is non-directional so it will quantify a trend's strength regardless of whether it
is up or down.
ADX is usually plotted in a chart window along with two lines known as the DMI or Directional
Movement Indicators.
ADX is derived from the relationship of the DMI lines.