About the Directional Movement Technical Analysis Indicator
The Directional Movement Indicator is one of the best indicators for telling the direction of the trend.
The Directional Movement Indicator not only tells you the direction of the trend, but also, the strength of the trend which can be of great help when making trading decisions.
On the below chart :
- The purple line is the plus Directional Movement line.
- The green line is the minus Directional Movement line.
- The red line is the ADX line.
When a market is choppy the Directional Movement line will stay close together and cross back and forth as price is choppy.
When the market makes a strong trending move the Directional Movement lines will move far a part with shows the market is moving strongly in one direction.
The Directional Movement Indicator can keep you on the right side of the market, because if the market shows a clear up trend, you would be looking to go long.
If the Directional Movement Indicator showed a clear down trend you would only be looking to go short.
You could also only trade strong trend staying out of the market when the Directional Movement indicator showed a sideways market.
Here is an excellent video explaining Directional Movement