Directional Movement Index | Trading using DMI

The Directional Movement Index, or DMI for short, is another incredibly popular indicator that measures both the strength and direction of a price movement. Today we’ll be diving into what the indicator is actually measuring and go through several methods to use it in your trading.
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The DMI itself is actually composed of three separate indicators combined into one. We first begin with the ADX line which is to used define whether or not a trend is present. It does not take direction into account at all, but rather trying to measure the strength of the trend. Traditionally, we would see a value greater than 25 on the ADX as an indication of a strong trend in either direction.

The other two indicators, the +DI line and -DI line, are then used to compliment the ADX. They serve the purpose of determining trend direction. By combining all three, we then have a way of determining and measuring a trend's strength as well as its direction.

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