If you are (or were) a fan of the RSI indicator will love Tushar Chande's Dynamic Momentum Index indicator, which simply put is a dynamic variable length RSI, so it is more powerful. The DMI indicator internally uses a variable number of bars in its calculations, taking into consideration the volatility levels of the current market you are analyzing. This way, the DMI indicator will use more bars as volatility decreases and fewer bars when volatility increases, giving you a more powerful analysis of the Overbought and Oversold stages of the asset being analyzed. If you want to be more in-depth with this subject, please read Tushar Chande & Stanley Kroll book "The New Technical Trader" from Wiley Finance.
How to "READ" the Colored Dynamic Momentum Index (DMI)
- Read as an RSI indicator, with traditional levels set at 30 and 70. Of course, tweaking the settings will give you more accuracy in analyzing your favorite asset. So try it!
- Readings below 30 are an Oversold state, and above 70, are an Overbought state.
SETTINGS
- DMI period (number of bars to analyze)
- DMI minimum number of bars to analyze. Default/Classic: 3 bars (days, if you are using daily charts)
- DMI maximum number of bars to analyze. DefaultClassic: 30 bars (days, if you are using daily charts)
- Standard Deviation period (number of bars). Default/Classic: 5 bars (days, if you are using daily charts)
- Standard deviation smoothing period (bars). Default/Classic: 10 bars (days, if you are using daily charts)
- Overbought/Oversold levels.
If you like this indicator, all I am asking is a little Review (not a Comment, but a REVIEW!)... This will mean A LOT to me... And this way I can continue to give away Cool Stuff for Free... With No Strings Attached! Ever!
Live Long and Prosper! ;)
