In case you are (or had been) a fan of the RSI indicator will love Tushar Chande’s Dynamic Momentum Index indicator, which merely put is a dynamic variable size RSI, so it’s extra highly effective. The DMI indicator internally makes use of a variable variety of bars in its calculations, bearing in mind the volatility ranges of the present market you’re analyzing. This manner, the DMI indicator will use extra bars as volatility decreases and fewer bars when volatility will increase, supplying you with a extra highly effective evaluation of the Overbought and Oversold levels of the asset being analyzed. If you wish to be extra in-depth with this topic, please learn Tushar Chande & Stanley Kroll e-book “The New Technical Dealer” from Wiley Finance.
How you can “READ” the Coloured Dynamic Momentum Index (DMI)
- Learn as an RSI indicator, with conventional ranges set at 30 and 70. After all, tweaking the settings offers you extra accuracy in analyzing your favourite asset. So attempt it!
- Readings under 30 are an Oversold state, and above 70, are an Overbought state.
SETTINGS
- DMI interval (variety of bars to research)
- DMI minimal variety of bars to research. Default/Traditional: 3 bars (days, in case you are utilizing every day charts)
- DMI most variety of bars to research. DefaultClassic: 30 bars (days, in case you are utilizing every day charts)
- Customary Deviation interval (variety of bars). Default/Traditional: 5 bars (days, in case you are utilizing every day charts)
- Customary deviation smoothing interval (bars). Default/Traditional: 10 bars (days, in case you are utilizing every day charts)
- Overbought/Oversold ranges.
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