[blackcat] L3 DMIQ

Feb 9, 2022

Level: 3

Background

The directional movement index (DMI) is an indicator developed by J. Welles Wilder in 1978 that identifies in which direction the price of an asset is moving. The indicator does this by comparing prior highs and lows and drawing two lines: a positive directional movement line (+DI) and a negative directional movement line (-DI). An optional third line, called the average directional index (ADX), can also be used to gauge the strength of the uptrend or downtrend.

Function

When +DI is above -DI, there is more upward pressure than downward pressure in the price. Conversely, if -DI is above +DI, then there is more downward pressure on the price. This indicator may help traders assess the trend direction. Crossovers between the lines are also sometimes used as trade signals to buy or sell.

The directional movement index (DMI) is a technical indicator that measures both the strength and direction of a price movement and is intended to reduce false signals.
The DMI utilizes two standard indicators, one negative (-DM) and one positive (+DN), in conjunction with a third, the average directional index (ADX), which is non-directional but shows momentum.
The larger the spread between the two primary lines, the stronger the price trend. If +DI is way above -DI the price trend is strongly up. If -DI is way above +DI then the price trend is strongly down.
ADX measures the strength of the trend, either up or down; a reading above 25 indicates a strong trend.


Remarks

Free and Open Source

Alerts are added.

Apr 19

Release Notes

OVERVIEW
The [blackcat] L3 DMIQ indicator is designed to help traders analyze market trends using the Directional Movement Index (DMI) and its derivatives. This indicator calculates various components of the DMI, including Plus DI, Minus DI, ADX, and ADX Rating, providing a comprehensive view of trend strength and direction. It also generates buy and sell signals based on specific conditions, helping traders make informed decisions 📈💹.

FEATURES

Calculates key DMI components:

True Range EMA
Directional Movement Plus (DI+)
Directional Movement Minus (DI-)
Average Directional Index (ADX)
ADX Rating
Plots the following lines on the chart:

Plus DI: Indicating upward movement.
Minus DI: Indicating downward movement.
ADX: Showing trend strength.
ADX Rating: Smoothing out the ADX values.
Generates buy ('B') and sell ('S') labels based on predefined conditions 🏷️

Provides customizable colors and line widths for plotted levels ⚙️

Includes functionality to set up alerts for trade signals 🔔

HOW TO USE

Add the indicator to your TradingView chart by selecting it from the indicators list.
Observe the plotted lines representing Plus DI, Minus DI, ADX, and ADX Rating.
Monitor the chart for generated buy ('B') and sell ('S') labels indicating potential trade opportunities.
Set up alerts based on the generated signals to receive notifications when conditions are met 📲.
Combine this indicator with other tools for confirmation before making trading decisions.
LIMITATIONS

The indicator relies heavily on DMI calculations, which may not capture all market nuances.
False signals can occur in ranging or sideways markets 🌪️.
Users should always confirm signals with other forms of analysis.
NOTES

Ensure that you have sufficient historical data available for accurate DMI calculations.
Test the indicator thoroughly on demo accounts before applying it to live trading 🔍.
Customize alert conditions as needed to fit your trading strategy.