Despite the hype, this is nothing more than a simple ADX/DMI histogram.
The Average Directional Index (ADX) and Directional Movement Index (DMI) can be used to identify trends and make trading decisions:
The ADX/DMI indicator can be susceptible to creating false signals, so it's best to use it in conjunction with other forms of analysis
The Average Directional Index (ADX) and Directional Movement Index (DMI) can be used to identify trends and make trading decisions:
- Identify trends
The ADX measures the strength of a trend, with values above 25 indicating a strong trend and values below 20 indicating a weak trend. - Generate trade signals
Crossovers of the +DI and -DI lines can indicate potential trade signals:- When the +DI crosses above the -DI, it could signal a buy if the ADX is above 25.
- When the -DI crosses above the +DI, it could signal a sell if the ADX is above 25.
- Identify breakouts
The ADX can help identify valid breakouts by showing when it's strong enough for prices to continue trending after the breakout. - Identify contraction periods
When the +DI and -DI lines move close together, it indicates a contraction in volatility. These are often followed by periods of larger, trending movement. - Consider the DMI's relative strength
The relative strength of the DMI's peaks can indicate the momentum of price. For example, a series of rising +DMI peaks that remain above the -DMI for extended periods of time indicates a strong uptrend.
The ADX/DMI indicator can be susceptible to creating false signals, so it's best to use it in conjunction with other forms of analysis
Ruby:
#this is my guess at Hubert Senters Powershift indicator
declare lower;
input length = 14;
input ADXLevel = 20;
input averageType = AverageType.WILDERS;
input alerts = yes;
def hiDiff = high - high[1];
def loDiff = low[1] - low;
def plusDM = if hiDiff > loDiff and hiDiff > 0 then hiDiff else 0;
def minusDM = if loDiff > hiDiff and loDiff > 0 then loDiff else 0;
def ATR = MovingAverage(averageType, TrueRange(high, close, low), length);
def diPlus = 100 * MovingAverage(averageType, plusDM, length) / ATR;
def diMinus = 100 * MovingAverage(averageType, minusDM, length) / ATR;
plot "DI+" = if diPlus > 20 then diPlus else Double.NaN ;
plot "DI-" = if diMinus > 20 then diMinus else Double.NaN;
def DX = if (diPlus + diMinus > 0) then 100 * AbsValue(diPlus - diMinus) / (diPlus + diMinus) else 0;
plot ADXCalc = MovingAverage(averageType, DX, length);
#plot ADX = if ADXCalc > ADXLevel then ADXCalc else Double.NaN;
plot triggerline = ADXLevel;
Alert(alerts and ADXCalc crosses above ADXLevel, " ", Alert.BAR, Sound.Ring);
Alert(alerts and ADXCalc > ADXLevel and "DI+" crosses "DI-", " ", Alert.BAR, Sound.Ring);
"DI+".SetDefaultColor(GetColor(1));
"DI+".SetPaintingStrategy(PaintingStrategy.HISTOGRAM);
"DI+".SetDefaultColor(Color.GREEN);
"DI-".SetDefaultColor(GetColor(8));
"DI-".SetPaintingStrategy(PaintingStrategy.HISTOGRAM);
"DI-".SetDefaultColor(Color.RED);
ADXCalc.DefineColor("Trending", Color.YELLOW);
ADXCalc.DefineColor("NonTrending", Color.GRAY);
ADXCalc.AssignValueColor(if ADXCalc >= 20 then ADXCalc.Color("Trending") else ADXCalc.Color("NonTrending"));
ADXCalc.SetLineWeight(2);
triggerline.SetDefaultColor(Color.WHITE);
Last edited by a moderator:
