Tushar Chande's DMI - indicator for MetaTrader 5

Definition of 'Dynamic Momentum Index'

An indicator used in technical analysis that determines overbought and oversold conditions of a particular asset. This indicator is very similar to the relative strength index (RSI). The main difference between the two is that the RSI uses a fixed number of time periods (usually 14), while the dynamic momentum index uses different time periods as volatility changes.

Explaination of 'Dynamic Momentum Index'

This indicator is interpreted in the same manner as the RSI where readings below 30 are deemed to be oversold and levels over 70 are deemed to be overbought. The number of time periods used in the dynamic momentum index decreases as volatility in the underlying asset increases, making this indicator more responsive to changing prices than the RSI.

This version has an additional smoothing in a form of using RSX for calculation not the original RSI. It has been added in order to make it a bit more readable. The original Chande's DMI is less smooth than this version and can raise more false signals. Using the rsx instead of rsi does not add any lag at all so we can say that using an rsx instead of rsi could be clasified as the "1% improvement" rule — what is sure that it is not worse than the original Chande's DMI.