The DMI indicator is a very important technical indicator in analysis, and every investor must be proficient in it. So how to use the DMI indicator to judge market trends? Let me introduce it to you.
01 DMI indicator
The DMI indicator analyzes the balance point of the supply-demand relationship in the process of rising and falling prices, that is, the supply-demand relationship will be subject to price changes to produce a cyclic process from equilibrium to imbalance.
This is the same as many other indicators. Different analysis data is calculated based on the daily closing price trend and the cumulative number of rise or fall. However, the difference between DMI and other indicators is that it does not ignore the daily high and low. The price fluctuation range.
This often happens in the market: the closing price of the two days may be the same, but if one of the days fluctuates less and the other day's amplitude is more than 10%, then the meaning of the two days of price fluctuations must be different. The DMI indicator is to calculate the daily fluctuation range of high and low prices, and comprehensively predict and analyze future market trends.
02 Judgment of DMI indicator
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Determine market trends
When the market trend develops from the sideways upward, the ADX value will continue to increase. Therefore, when the ADX value is higher than the previous day, it can be judged that the current market conditions are still maintaining the original upward trend. That is, prices will continue to rise.
If MDI and PDI increase at the same time, it indicates that the current upward trend will be very strong. When the market trend enters the flat phase, the ADX value will continue to decrease. Therefore, when judging the market, the price trend (MDI and PD1) should be used for judgment.
When the market trend develops downward from consolidation, the ADX value will continue to decrease. Therefore, when the ADX value is lower than the previous day, it can be judged that the current market situation still maintains the original downward trend, that is, the price will continue to fall. If MDI and PDI decrease at the same time, it means that the current downward trend will continue.
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Determine whether the market is consolidating
When the market situation is slightly sideways in a certain area, ADX will appear to decline. When the ADX value drops below 20, and it moves in a narrow lateral direction. It can be judged that the market is a cowhide consolidation, and the upward or downward trend is uncertain. Investors should mainly wait and see, and cannot buy and sell stocks based on the cross signals of MDI and PDI.
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Determine whether the market has changed
When the ADX value changes from rising to falling at a high point, it indicates that the market is about to reverse, which can be divided into the following two situations.
In the rising trend, ADX turned from rising to falling at high points. It indicates that the rally is about to come to an end. The ADX value in the downtrend fell from the high, indicating that the downtrend may stop.