Technical Indicators: D
Demarker Indicator
Developed by Tom Demarker, the Demarker Indicator is an oscillator which identifies risk areas for buying and selling. It is an attempt to overcome the shortcomings of classical overbought / oversold indicators, making price comparisons from one bar to the next and measuring the level of price demand.
It is similar to the Demarker Range Expansion Index in that it identifies price exhaustion that normally correspond with tops and bottoms. The x-axis ranges from -100 to 100. Look for rises above 60 to indicate low risk and look for areas below 40 to indicate high risk.
Detrended Price Oscillator
The Detrended Price Oscillator is a tool that smoothes the trend in prices, allowing you to more easily identify cycles and overbought/oversold levels.
If you think of long-term cycles as made up of a series of short-term cycles, then analyzing these shorter term components can be helpful in identifying major turning points.
Note that as the oscillator moves above and below the zero line, minor peaks in the DPO will usually coincide with minor peaks in price. Longer-term price trends are not reflected as the 20-day DPO removes cycles of more than 20 days.
DI+
The Directional Momentum Indicator is an attempt to quantify the trending or directional behavior of a market. It helps identify trends and whether or not price is moving quickly enough to be worth a long or short play.
+DI and -DI are components in the calculation of the ADX (Average Directional Movement) and ADXR (Directional Movement Rating) indicators. Perhaps the best way to think of the +DI is as a measure of the percentage of upwards movement. When the +DI value is greater than the -DI, a long position is indicated.
DI-
Directional Movement is a system for discovering trading signals to be used for price breaks from a trading range. It involves 5 indicators: Directional Movement Index (DX), the plus Directional Indicator (+DI), the minus Directional Indicator (-DI), the Average Directional Movement (ADX) and the Average Directional Movement Rating (ADXR).
Wilder defines -DI as the percentage of the true range that is down. When the -DI is greater than +DI, a short position is indicated.
Directional Movement Index
Directional Movement helps determine if a security is "trending." Developed by Welles Wilder and explained in his book, New Concepts in Technical Trading Systems, it can be used either as a system on its own or as a filter on a trend-following system.
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Two lines are generated in a DMI study, +DI and -DI. The first line measures positive (upward) movement and the second number measures negative (downward) movement. A buy signal is given when the +DI line crosses over the - DI line while a sell signal is generated when the +DI line crosses below the - DI line.
In addition to these crossover rules, Wilder believes one should also follow the extreme point rule. When a crossover occurs, use the extreme price as the reverse point. For a short position, use the high made during the trading interval of the crossover. Reverse a long position using the low made during the trading interval of the crossover.
Disparity Index
Steve Nison refers to his Disparity Index as "a percentage display of the latest close to a chosen moving average." This can be defined mathematically using the formula:
[ C - Mov(C,X,MA ) ] / [ Mov(C,X,MA) * 100 ]
Where X is the number of time periods and MA is the calculation type of the moving average.
Dynamic Momentum Index
Developed by Tushar Chande and Stanley Kroll, the Dynamic Momentum Index is quite similiar to Welles Wilder's Relative Strength Index. The differnce is the DMI uses variable time periods (from 3 to 30) vs. the RSI's fixed periods.
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. During quiet market conditions the DMI will use more time periods while less are used during more active markets. As a result, the DMI is more sensitive to fluctuations in the market and displays changes more rapidly than the RSI can.
Much like the RSI, Chande recommends using the DMI much the same as the RSI, with bearish conditions appearing at 70 or above and bullish conditions below 30. Remember, as the DMI is more sensitive to market dynamics, it often leads the RSI into overbought / oversold territories by one or two days.
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