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.
DMI Equilibrium Rule
When the +DMI and -DMI are below 25 and moving sideways, the trend has no dominant direction.
DMI Volatility Crossover Rule
In high volatility conditions, DMI crossovers are lagging signals. In low volatility conditions, DMI crossovers are coincident signals.
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.
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.
DMI Continuation High Rule
During a retracement when DMI dominance is maintained, a new high in the dominant DMI confirms continuation of the trend.
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.
ADX Value = Trend Strength
- 0-15=Very weak
- 50-75=Very strong
- 75-100=Extremely strong
ADX Trendline Rule
When ADX is below 25 for an extended period (>20 bars), draw trendlines on price and wait for a breakout.
ADX Retracement Rule
The ADX slope will rise during strong trend legs and decline during retracements.
Intratrend ADX Strength Rule
Higher ADX peaks are not required for prices to go higher in an uptrend or lower in a downtrend.
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.
Counter Trend ADX Relative Strength Rule
In an established trend, a lower counter trend ADX peak usually leads to continuation of the trend.