DMI/ADX consistently works

[kowboy]

Quote from Hexik:

My post will try to look at DMI/ADX from different point of view.
All is about change or direction+rate of change.

Purely from math long trend is starting when: (first derivative of DMI+ > 0) AND (first derivative of DMI- < 0) AND (first derivative of DMI+ > abs(first derivative of DMI > 0) AND ). Maybe it sound ugly, for chartist: DMI+ goes up, DMI- goes down and DMI+ goes up steeper than DMI- declines. In other words, if DMI+ is below DMI- you CAN anticipate crossing.

Yes, right on. I believe that even the first derivative would be extrememly helpful to get a handle on which stocks the DMI- and the DMI+ were about to converge the fastest.

Is there a way to do a scan for this?

Thanks

 

[Davo]

Thanks much NYC for sharing!

Thanks Stok for figuring out the ADX DX difference on NYC's charts.

 

[ElectricSavant]

Because it works

Quote from nyc-hotshot:

I use a smooth period of 15.

I'm telling you DMI works way better than MACD and Stochastics in my experience. The DMI works on all levels of chart: 1 minute, 5 minute, 1 day, 1 month etc... When you look at the buy/sell call and the stock price it consistently works. I don't know why more people haven't been discussing this.

 

[Remiraz]

Quote from ElectricSavant:

Because it works

because it doesn't.

a simple backtest will show that.

 

[cnms2]

Interesting and amusing thread. A bunch of good posts and a lot of confusion. Bottom line: it doesn't work on my charts.

Good trading everybody!

 

[steve46]

Yes, it is an interesting subject.

When you say that it does not work on your charts, you are really saying that at this point in time, you cannot make it work.

If you were to take a moment to understand how the indicator works, you might have a better chance of success.

Ironically, the person who started the thread knows very little about how ADX/DMI actually works. Also the folks who posted after him (and were throwing around the useless jargon) have not managed to advance their understanding of the indicator at all.

The best way to understand the indicator would be to read Wilder's book "New Concepts in Technical Trading Systems". Absent that, here is a reference that summarizes the concepts for those who might be interested.

http://www.trade10.com/Directional_Movement.html

Good luck folks
Steve

 

[stevegee58]

Here's another reputable source on TA stuff:

StockCharts.com ADX

 

[cnms2]

Quote from steve46:

Yes, it is an interesting subject.

When you say that it does not work on your charts, you are really saying that at this point in time, you cannot make it work.

If you were to take a moment to understand how the indicator works, you might have a better chance of success.

Ironically, the person who started the thread knows very little about how ADX/DMI actually works. Also the folks who posted after him (and were throwing around the useless jargon) have not managed to advance their understanding of the indicator at all.

The best way to understand the indicator would be to read Wilder's book "New Concepts in Technical Trading Systems". Absent that, here is a reference that summarizes the concepts for those who might be interested.

http://www.trade10.com/Directional_Movement.html

Good luck folks
Steve

What I mean is that nyc's 15 bar ADX is neither the 15 bar ADX nor the 1 bar ADX my Prophet charts draws. It seams that Prophet can't draw the DX either. I also unsuccessfully tried the 7 and 8 bar ADX after I found out that Wilder calculates averages differently.

http://www.incrediblecharts.com/technical/directional_movement.htm

• 
  *Welles Wilder's Indicators
  
  Users should beware, when setting time periods for Welles Wilder's indicators, that he does not use the standard exponential moving average formula. For example, Wilder describes 1/14 of today's data + 13/14 of yesterday's average as a 14-day exponential moving average. If you refer to Exponential Moving Averages you will see the formula equates to a 27-day exponential moving average.
  
  Indicators affected are:
  
  Average True Range
  Directional Movement System
  Relative Strength Index
  Twiggs Money Flow
  We recommend that users try shorter time periods when using one of the above indicators. For example, if you are tracking a 30-day cycle you would normally select a 15-day Indicator Time Period. With the DMS, adjust the time period as follows:
  
  DMS time period = (n + 1) / 2 = (15 + 1) / 2 = 8 days
  

So far none of the recommended DMI or ADX methodologies worked consistently for me. Are you currently using any in your trading? I haven't read yet the trade10.com info.

Thanks

 

[nononsense]

Quote from Remiraz:

because it doesn't.

a simple backtest will show that.

Quote from cnms2:


So far none of the recommended DMI or ADX methodologies worked consistently for me. ...

You may have a point there.
In his later years, Welles himself must have found out about this. Since then he moved on to peddling more exotic proprietary delta stuff.

 

[nononsense]

Quote from kowboy:

As a result of this useful thread I have been experimenting using Pmi and Dmi scans in the evening, which has produced what appears to be good swing trade prospects.
...

In case you didn't know yet, 'good appearing prospects' never make money, neither in swinging nor in any other trading style.