DMI-ADX Histogram

The Average Direction Index ( ADX ) coupled with the Direction Movement Index (DMI), developed by J. Welles Wilder, is a popular indicator that measures trend direction and strength.

The AX line (blue) is used to show the strength of the current trend. It does not tell you the trend direction. The under laid histogram shows relative movements of the price with green showing positive momentum and red showing negative momentum. Use these ADX and DMI together to find trend strength and direction.

- ADX line below 20 indicates that the underlying is in accumulation/distribution .
- ADX line above 20 mean that the underlying is trending with over 60 being very strong.

*When the ADX line is below 20 it is likely to see many reversal signals on the DMI Histogram. It is best to use the DMI signals when the ADX line is above 20 or higher. This is also a good level to play around with.

Normally the direction movements are plotted as lines with the DI+ being green and the DI- being red. When the DI+ (green) crosses over DI- (red) this may indicate a buy signal, and vice versa. I found this visual representation made it difficult to see signals as well as lacked the ability to easy see the relative strength of other moves.

I have also noticed that the histogram values will periodically cross the ADX line, but not for very long periods. This could be a useful signal to explore further in the future.

In this image the top indicator is using the normal DI+/- lines, where the bottom indicator is using an absolute histogram.

Notas de Lançamento: - Added ADX in title
- As per TradingView's terms, removed the social media reference link to YouTube.
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