DMI Steps (DmiStep)

Philosophy

This study records the closing value of a bar when the Dmi Up or Dmi Down cross up or down from each other. This is different to most of the other studies within the Step suite in that they use a moving average of the momentum indicator itself. This means that the default setting of 10 can lead to many steps in a sideways market and relatively few once a market begins to trend. Therefore, by default the Step process on the Dmi lends itself more to qualifying trends and sideways as opposed to divergence.

In order to understand and qualify both trend and sideways the studies can just record the value of the bar as opposed to many of the other Step studies that lend themselves to the value of both the bar and the indicator itself. This is because the Dmi up or down rarely reach extreme levels above 50.

Interpretation

The use of Steps with Dmi can be interpreted for both the use as a trend qualifier and in contrast to other step studies, the indication of sideways.

To indicate a trend it is the absence of any change in a step value that indicates a trend. The longer the difference between Steps the stronger the trend. This is in contrast to many of the other Step studies. This is because we already and in built calculation within the Dmi steps via Dmi Up and Dmi Down. The other difference is that both Step values if they continue to step in the same direction as each other, confirms that the trend is continuing. Therefore a Step on either indicator in the opposite direction signals that the trend is over.

Sideways is defined by the close proximity of Steps and the fact that Steps switch for up to down.

DmiStep Parameters