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Dynamic Momentum Index (DMI)

The Dynamic Momentum Index (DMI) was developed by Tushar Chande and Stanley Kroll. The indicator is described in detail in their book "The New Technical Trader". Chande's DMI is very similar to Welles Wilder's Relative Strength Index (RSI), however, there is one very important difference. Unlike the RSI which uses a fixed number of periods, the Dynamic Momentum Index uses a variable amount of periods as market volatility changes. The number of periods the DMI uses decreases as market volatility increases thereby allowing the indicator to be more responsive to price changes. The Dynamic Momentum Index can be interpreted in much the same way was as the more traditional RSI as an overbought and oversold indicator. Readings above 70 are considered to be overbought while readings under 30 are considered to be oversold.

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Implementation

Every input required to calculate this indicator has been parameterized to allow the user full customization of this indicator. This includes the price, standard deviation periods, MA of standard deviation periods, MA of statndard deviation type, the DMI periods as well as the upper and lower bounds for the DMI periods that determines the range the dynamic periods can fluxuate between.

www.cmsfx.comThe DMI indicator has 2 indicator plots available. The default display is the Dynamic Momentum Index indicator itself. The secondary display plot is the dynamic periods. This allows the user to see what periods length is being used for any given bar loaded in the chart.

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