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    ADX/DMS

    Definition

    The ADX/DMS (sometimes called DMI instead of DMS) is a set of indicators within technical analysis that helps traders identify the strength and direction of a trend. The ADX measures the strength of a trend but not its direction, while the DMS includes two lines, the +DI (Positive Directional Indicator) and -DI (Negative Directional Indicator), which help indicate the trend's direction.

  • ADX: Values above 25 generally indicate a strong trend, while values below 20 suggest a weak or non-trending market.
  • +DI and -DI: These lines help in identifying whether the trend is upward (+DI) or downward (-DI).

    • Suggested Trading Use

    Traders can utilize the ADX/DMS Study to gauge the robustness of a trend and make informed decisions on entry and exit points. A strong trend (ADX above 25) combined with +DI crossing above -DI may suggest a strong upward trend, suitable for a buying position. Conversely, a strong trend with -DI crossing above +DI may signal a strong downward trend, suitable for selling or shorting.