The Average Directional Index (ADX), Minus Directional Indicator (-DI), Plus Directional Indicator (+DI) and Relative Strength Index (RSI) represent a group of directional movement indicators that form this unique trading system. The ADX measures trend strength without regard to trend direction. The other two indicators, +DI and -DI, complement ADX by defining trend direction. RSI is an overbought-oversold indicator that compares the magnitude of a stock’s recent gains to the magnitude of its recent losses.
The basic Directional Movement Trading system involves comparing the 14-day ADX, +DI, -DI, RSI and momentum to form a Buy-Sell signal. Additional comparisons are performed at 24, 38 and 62 day. Buy-Sell prices are calculated from linear regression analysis at 24, 38, 50 and 62 days.
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