Dynamic Momentum Index (DMI)

dynamic momentum index dmi momentumoscillator

This indicator plots Dynamic Momentum Index indicator. The Dynamic Momentum
Index (DMI) was developed by Tushar Chande and Stanley Kroll. The indicator
is covered in detail in their book The New Technical Trader.
The DMI is identical to Welles Wilder`s Relative Strength Index except the
number of periods is variable rather than fixed. The variability of the time
periods used in the DMI is controlled by the recent volatility of prices.
The more volatile the prices, the more sensitive the DMI is to price changes.
In other words, the DMI will use more time periods during quiet markets, and
less during active markets. The maximum time periods the DMI can reach is 30
and the minimum is 3. This calculation method is similar to the Variable
Moving Average, also developed by Tushar Chande.
The advantage of using a variable length time period when calculating the RSI
is that it overcomes the negative effects of smoothing, which often obscure short-term moves.
The volatility index used in controlling the time periods in the DMI is based
on a calculation using a five period standard deviation and a ten period average
of the standard deviation.

Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

Disclaimer

The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.

Want to use this script on a chart?

////////////////////////////////////////////////////////////
//  Copyright by HPotter v1.0 24/04/2014
// This indicator plots Dynamic Momentum Index indicator. The Dynamic Momentum 
// Index (DMI) was developed by Tushar Chande and Stanley Kroll. The indicator 
// is covered in detail in their book The New Technical Trader.
// The DMI is identical to Welles Wilder`s Relative Strength Index except the 
// number of periods is variable rather than fixed. The variability of the time 
// periods used in the DMI is controlled by the recent volatility of prices. 
// The more volatile the prices, the more sensitive the DMI is to price changes. 
// In other words, the DMI will use more time periods during quiet markets, and 
// less during active markets. The maximum time periods the DMI can reach is 30 
// and the minimum is 3. This calculation method is similar to the Variable 
// Moving Average, also developed by Tushar Chande.
// The advantage of using a variable length time period when calculating the RSI 
// is that it overcomes the negative effects of smoothing, which often obscure short-term moves.
// The volatility index used in controlling the time periods in the DMI is based 
// on a calculation using a five period standard deviation and a ten period average 
// of the standard deviation.
////////////////////////////////////////////////////////////
study(title = "Dynamic Momentum Index (DMI) ")
RSILen = input(14, minval=1)
BuyZone = input(30, minval=1)
SellZone = input(70, minval=1)
UpLimit = input(30, minval=1)
LoLimit = input(5, minval=1)
bbz = hline(0, color=gray, linestyle=dashed)
bz = hline(BuyZone, color=green, linestyle=line)
sz = hline(SellZone, color=red, linestyle=line)
ssz = hline(100, color=gray, linestyle=line)
xStdDev = stdev(close, 5) 
xSMAStdDev = sma(xStdDev, 10)
DTime = round(14 / xSMAStdDev - 0.5)
xDMI = iff(DTime > UpLimit, UpLimit,
            iff(DTime < LoLimit, LoLimit, DTime))
xRSI = rsi(xDMI, RSILen)
pl = plot(xRSI, style=line, linewidth=1, color=blue)
fill(bz, bbz, color=green)
fill(sz, ssz, color=red)

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