Google Time for Reversal

Price reached 790 level and probably we'll see reversal and correction wave. MACD and RSI formed bearish divergence. DMI allows open short trades. We can place a pending order below MA20 and stop above the swing high. Profit target can be MA50.
Trade closed: target reached
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Why does the DMI allow to open short trades? Due to which information you get from this indicator? I just want to understand your reasoning due to my current interest in using the DMI more to trade.

I only see the DMI plus above the DMI minus here on you chart, which is (still) bullish to me. Which implies to me a larger risk to open short trades.
DLavrov ChartArt
Thank you very much for your comment and question. So as for DMI there are standart signals like: if DI plus is above DI minus - it's time for long trades. If DI minus is above DI plus - it's time for short trades. Also if ADX line is above 20-25 it means that we have trend conditions and if ADX is below 20-25 level we have range market. If ADX rises we have strong movement. I use all these signals also. As for this example let's look at this setup one more time.
We a possible reversal level 790. We have confirmation from RSI that price bounced from the level. MACD falls and confirm short trades. We have bearish divergence which is strong reversal pattern. And ADX falls - it means WE DON'T HAVE STRONG UP MOVEMENT. In such way, why not to open a short trade with close profit traget? Yes, we have up trend and DMI confirms. If ADX rises, we will have to wait for reversal and only after that think about short trades.
+1 Reply
ChartArt DLavrov
Thank you for your really detailed explanation. I suspected you were looking at the falling volatility signaled by the ADX, but thought this alone, might not be enough to mention the DMI. But as you said all these other signals confirmed your idea. So good trade idea.
DLavrov ChartArt
Thank you very much )
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