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DMI Direction Rule
- When the +DMI is above -DMI, the trend direction is up.
- When the -DMI is above +DMI, the trend direction is down.
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DMI Equilibrium Rule
When the +DMI and -DMI are below 25 and moving sideways, the trend has no dominant direction.
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DMI Volatility Crossover Rule
In high volatility conditions, DMI crossovers are lagging signals. In low volatility conditions, DMI crossovers are coincident signals.
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DMI Crossover High Rule
- A LONG crossover high signal occurs when a +DMI crossover makes a higher opposite high above 25.
- A SHORT crossover high signal occurs when a -DMI crossover makes a higher opposite high above 25.
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DMI Dominance Rule
A DMI becomes dominant after a crossover high or cross and hold and remains dominant until the opposite DMI does the same.
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DMI Continuation High Rule
During a retracement when DMI dominance is maintained, a new high in the dominant DMI confirms continuation of the trend.
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ADX Trend Strength Rule
- When ADX is above 25, trend strength is strong enough for trend trading strategies.
- When ADX is below 25, avoid trend trading strategies.
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ADX Value = Trend Strength
- 0-15=Very weak
- 15-25=Weak
- 25-50=Strong
- 50-75=Very strong
- 75-100=Extremely strong
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ADX Trendline Rule
When ADX is below 25 for an extended period (>20 bars), draw trendlines on price and wait for a breakout.
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ADX Retracement Rule
The ADX slope will rise during strong trend legs and decline during retracements.
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Intratrend ADX Strength Rule
Higher ADX peaks are not required for prices to go higher in an uptrend or lower in a downtrend.
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ADX Relative Strength Rule
- A lower ADX high (greater than 25 and divergent with price) is a warning of a trend retracement.
- A lower ADX high (less than 25 and divergent with price) is a warning of a trend reversal.
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Counter Trend ADX Relative Strength Rule
In an established trend, a lower counter trend ADX peak usually leads to continuation of the trend.
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