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The average directional movement index (ADX) was developed in 1978 by J. Welles Wilder as an indicator of trend strength in a series of prices of a financial instrument.[1] ADX has become a widely used indicator for technical analysts, and is provided as a standard in collections of indicators offered by various trading platforms.
The ADX is a combination of two other indicators developed by Wilder, the positive directional indicator (abbreviated +DI) and negative directional indicator (-DI).[2] The ADX combines them and smooths the result with a smoothed moving average.
To calculate +DI and −DI, one needs price data consisting of high, low, and closing prices each period (typically each day). One first calculates the directional movement (+DM and −DM):
UpMove = today's high − yesterday's high
DownMove = yesterday's low − today's low
if UpMove > DownMove and UpMove > 0, then +DM = UpMove, else +DM = 0
if DownMove > UpMove and DownMove > 0, then −DM = DownMove, else −DM = 0
After selecting the number of periods (Wilder used 14 days originally), +DI and −DI are:
+DI = 100 times the smoothed moving average of (+DM) divided by average true range
−DI = 100 times the smoothed moving average of (−DM) divided by average true range
The smoothed moving average is calculated over the number of periods selected, and the average true range is an smoothed average of the true ranges. Then:
ADX = 100 times the smoothed moving average of the absolute value of (+DI − −DI) divided by (+DI + −DI)
Variations of this calculation typically involve using different types of moving averages, such as an exponential moving average, a weighted moving average or an adaptive moving average.
With this MTF version DMI, you can apply any time frame of DMI to your current chart.
You can have DMI of 15 or 60 minute on your 5 minutes chart, or having weekly DMI on Daily chart.
As long as the secondary time frame is greater than the primary time frame.
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