Skip to main content
Track Average Directional Index
45 / 56
Search the archiveLibrary
Library

2013issue C0130-37

Constructing a late-entry stack from a signed DMI oscillator

The Average Directional Index reports strength of movement but not direction. A DMI oscillator formed from the plus and minus directional indicators becomes the Trend filter, and a DMI stochastic of that series times pullbacks for a Momentum strategy that enters only with the oscillator's sign.

  • The Average Directional Index reports strength of movement, while the plus and minus directional indicators supply signed direction over a lookback.
  • Subtracting the minus directional indicator from the plus directional indicator produces a zero-centered DMI oscillator that can color price bars and serve as the Trend filter.
  • The DMI stochastic applies a 10-3-3 formula to oscillator values, not closing prices, with outer bands at 10 and 90, so Momentum strategy entries stay on the oscillator's side of zero.
  • Reversal alerts and opposite stochastic extremes after a plus-20 or minus-20 reading are reserved for warnings, stop adjustment, and short-lived pauses rather than standalone entries.
Entries in this reading3 entries
Current trackAverage Directional Index71 readingsMomentum strategy103 readingsTrend filter137 readings

Strength without direction

The Average Directional Index reports strength of movement but not direction. The plus and minus directional indicators supply the signed direction over a lookback.

Building the DMI oscillator

Subtracting the minus directional indicator from the plus directional indicator produces a DMI oscillator, plotted through zero. The zero line is the plus and minus directional-indicator intersection. Converting the plot to a histogram does not change those values or that cross.

The construction uses a 10-period lookback for both directional indicators instead of the common 14-period default and overlays a one-period moving average of the oscillator. Price bars can be colored by the sign of the oscillator so the Trend filter state is visible on the price pane.

A stochastic of the oscillator

The DMI stochastic applies a 10-3-3 stochastic formula to the oscillator series rather than bar closes and places outer bands at 10 and 90 instead of 20 and 80.

A directional Momentum strategy

The Momentum strategy procedure takes entries only in the oscillator's direction: oversold stochastic pullbacks when the oscillator is above zero, and overbought pullbacks when it is below zero.

During rangebound action the oscillator often stays inside a plus-10 to minus-10 band, and the area around zero can act as oscillator support or resistance.

Reversal alerts and a countertrend pause

Reversal alerts mark crosses of the DMI stochastic through a three-period moving average of itself. They appear too often to serve as standalone entries and are reserved for warnings and stop adjustment.

When the oscillator reaches plus 20 or minus 20, the next opposite stochastic extreme is treated as a possible short-lived countertrend pause rather than a fresh trend-following entry.

Bar lengths and scope

The two-indicator template is described as more usable on 60-minute, end-of-day, and weekly bars than as a primary intraday tool. It is not presented as a complete trading system.

BBBY daily DMI stochastic, January–May 2012

Bed Bath & Beyond’s daily DMI stochastic, read from the published eSignal pane for late January through 16 May 2012, repeatedly tags the 10 and 90 rails while the signed DMI oscillator stays mostly above zero after the February washout. Oversold turns near 10 are the late-entry timers in that uptrend; the mid-March V and the April floor near zero show the same oscillator-based stochastic flipping between extremes, which is what the reversal-alert diamonds mark on price.
Bed Bath & Beyond’s daily DMI stochastic, read from the published eSignal pane for late January through 16 May 2012, repeatedly tags the 10 and 90 rails while the signed DMI oscillator stays mostly above zero after the February washout. Oversold turns near 10 are the late-entry timers in that uptrend; the mid-March V and the April floor near zero show the same oscillator-based stochastic flipping between extremes, which is what the reversal-alert diamonds mark on price.BBBY · daily · 2012-01-24T00:00:00.000Z to 2012-05-16T00:00:00.000Z

Star computes a 10-period +DI minus 10-period −DI, then a 10,3,3 stochastic of that oscillator with extremes at 10 and 90 rather than the usual 20 and 80. Point readings are visual samples of the plotted line against the 0/25/50/75/100 grid, so they are approximate; the last print on the pane is 3.57.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
45 of 56 in the Average Directional Index track
201363-71 pp.Next on Average Directional IndexA directional oscillator and its stochastic as a stacked timing filterA directional-movement oscillator from plus and minus directional indicators can be plotted as a histogram around zero so regime is the sign of that series.
All readings on this track · 56 readings
  1. 1986Cycle-aligned directional trend indicator
  2. 1987What crossover and directional entry rules actually compare
  3. 1988A directional-line cross needs a trend filter, an extreme-point rule, and a dollar stop
  4. 1988Constructing true range by offset addressing
  5. 1988Constructing directional movement from bar range
  6. 1988Average directional index construction: recursive smoothing and lookback offset
  7. 1988Staged Average Directional Index construction with Relative Strength Index confirmation and stop alerts
  8. 1988Average Directional Index construction with frozen true range and directional rules
  9. 1991Constructing the average directional index from range expansion and true range
  10. 1991Constructing five-session forecasts from stochastic, ADX, and MACD inputs
  11. 1993Constructing the average directional index from directional movement and true range
  12. 1993Confirming n-bar breakouts with ADX and DX filters
  13. 1994Constructing a Bollinger band-width trend filter
  14. 1994A pre-trade checklist that can refuse a long three ways
  15. 1997An ADX threshold and a moving average as a trend filter
  16. 1998Regime filters for mutated indicators
  17. 1999Building the average directional index from range extension and true range
  18. 2000Evaluating ADX, RSI, and moving averages in a multi-stock warehouse
  19. 2000Stochastic pop as a filtered continuation setup
  20. 2000Onset and exit from one average directional index
  21. 2002Joint ADX and MACD readout for trend strength and direction
  22. 2003Adaptive Donchian breakout with implied volatility and volume
  23. 2004The average directional index as a regime gate for the relative strength index and the stochastic oscillator
  24. 2004Constructing true-range-specified volume as a directional filter
  25. 2005Constructing a multi-filter penny stock breakout procedure
  26. 2005Construct one playbook that flips with session regime
  27. 2005Combining Bollinger Bands, the average directional index, and Fibonacci retracement on currency pairs
  28. 2006Assembling an adaptive price zone from double-smoothed averages
  29. 2006An ADX strength gate for MACD and the stochastic oscillator
  30. 2007Directional movement as a filter plus trigger
  31. 2007Constructing a veto-first trend permission stack
  32. 2007ADX gates for trend end, range, and reversal
  33. 2008Constructing a nine-cell directional-ratio grid
  34. 2008Average directional index and directional trend indicator lookbacks as trend-filter parameters
  35. 2008A holding-matched market lens from averages and directional-line crosses
  36. 2008A nine-cell directional scoreboard for multi-horizon entries
  37. 2010Building a Vortex Indicator from high-low distances
  38. 2010Constructing ADX, RSI, and MACD price filters
  39. 2011Constructing a volume zone oscillator with a moving-average and Average Directional Index regime filter
  40. 2011A volume zone oscillator conditioned by an Average Directional Index filter
  41. 2011Candlestick names need volume-price, ADX, and moving-average checks
  42. 2012Clustered average-directional-index traces as a trend-start filter
  43. 2012Average Directional Index cluster filters for trend-start signals
  44. 2012Confirming a trend start or turn with a triple ADX cluster
  45. 2013Constructing a late-entry stack from a signed DMI oscillator
  46. 2013A directional oscillator and its stochastic as a stacked timing filter
  47. 2013ADX cluster lookbacks are a locked specification, not a chart label
  48. 2013Combining moving averages, stochastics, and ADX in a daily scan
  49. 2015Assembling the Average Directional Index from directional movement
  50. 2016How an Average Directional Index filter and a breakout entry form one procedure
  51. 2016Score RSI and stochastic crossings only when ADX confirms the trend
  52. 2018Constructing an ADX filter for intraday breakouts
  53. 2018An ADX volatility gate for prior-day breakouts
  54. 2019Exponential deviation bands with a moving average, RSI and ADX
  55. 2020A normalized-slope trend filter from linear regression
  56. 2020Gating volatility-momentum divergences with a Trend filter
By fieldIndicators and filters682 readingsBy year201398 readings
All 71 readings tagged Average Directional Index
Also on Average Directional Index5 readings
2016How an Average Directional Index filter and a breakout entry form one procedure1993Confirming n-bar breakouts with ADX and DX filters1994Constructing a Bollinger band-width trend filter1997An ADX threshold and a moving average as a trend filter1998Regime filters for mutated indicators