Positive Directional Indicator (+DI)

What Is the Positive Directional Indicator (+DI)?

The Positive Directional Indicator (+DI) is a part of the Average Directional Index (ADX) and is utilized to measure the presence of a uptrend. At the point when the +DI is inclining up, it is a signal that the uptrend is getting stronger.

This indicator is almost consistently plotted along with the Negative Directional Indicator (- DI).

Formula for the Positive Directional Indicator (+DI)

$\begin &\text{+DI} = \left ( \frac{ \text{S +DM} }{ \text } \right ) \times 100 \ &\textbf\ &\text{S +DM} = \text{Smoothed +DM} \ &\text{+DM (Directional Movement)} = \text - \text \ &\text = \text \ &\text{S +DM} = \textstyle{ \left ( \sum_{14} \text{+DM} \right ) - \left ( \frac{ \sum_{14} \text{+DM} }{ 14 } \right ) + ( \text{C +DM} ) } \ &\text{C +DM} = \text{Current +DM} \ &\text = \text \ \end$

Instructions to Calculate the Positive Directional Indicator (+DI)

1. Compute +DI by finding +DM and True Range (TR).
2. +DM = Current High - Previous High.
3. Any period is considered a +DM if the Current High - Previous High > Previous Low - Current Low. Use - DM when Previous Low - Current Low > Current High - Previous High.
4. TR is the greater of the Current High - Current Low, Current High - Previous Close, or Current Low - Previous Close.
5. Smooth the 14-periods of +DM and TR utilizing the formula below. Substitute TR for +DM to ascertain ATR. [The calculation below shows a smoothed TR formula, which is somewhat different than the official ATR formula. Either formula can be utilized, however utilize one consistently].
6. Initial 14-period +DM = Sum of initial 14 +DM readings.
7. Next 14-period +DM value = First 14 +DM value - (Prior 14 DM/14) + Current +DM
8. Next, divide the smoothed +DM value by the ATR value to get +DI. Increase by 100.

What Does the Positive Directional Indicator (+DI) Tell You?

Traders will regularly follow the position of +DI versus - DI. At the point when +DI is greater than - DI there is supposed to be a bullish trend. Subsequently, when +DI crosses above - DI it signals the potential at another cost uptrend.

When - DI is above +DI the price is in a bearish trend. When - DI crosses above +DI it could signal the beginning of a downtrend in price.

The +DI and - DI, combined, are called the Directional Movement Index (DMI). This system can be enhanced by the addition of the Average Directional Index (ADX).

ADX shows the strength of a trend. More out of control reported that a strong trend can be obvious when the Average Directional Index is greater than 20, and particularly 25.

Along these lines, every one of the lines can be utilized together. At the point when the ADX is over 20, and the +DI is above (or crossing) - DI then long trades ought to be inclined toward. At the point when ADX is over 20 and the - DI is above (or crossing) +DI then short trades ought to be leaned toward.

The Differences Between the Positive Directional Indicator (+DI) and a Moving Average

While the +DI tracks positive price movements, there are several differences among it and a moving average. A moving average is the average price of an asset throughout a set time span. The +DI is just figuring in the current high minus the prior high, when applicable. Due to the calculation differences, a moving average will give different data to a trader than the +DI.

Limitations of Using the Positive Directional Indicator (+DI)

Utilized all alone, the +DI indicator doesn't uncover a lot. To offer some benefit, it is combined with the Negative Directional Indicator (- DI). Along these lines, traders can measure which direction has more force and furthermore spot crossovers that might signal recent fads.

A third line, called the ADX, is likewise frequently added. This line shows trend strength by taking a smoothed average of the difference among +DI and - DI.

Even with these additional lines, the indicator can in any case create defective signals. Crossovers might happen however no trend in price creates. Additionally, the indicator is taking a gander at historical prices and consequently isn't really predictive of where prices will go next.

Highlights

• At the point when the +DI is moving down, and below the - DI, then the price downtrend is strengthening.
• The +DI is a part inside the Average Directional Index (ADX). The ADX is intended to show trend direction as well as trend strength.
• At the point when the Positive Directional Indicator (+DI) is moving up, or more the Negative Directional Indicator (- DI), then the price uptrend is strengthening.
• Planned by Welles Wilder for commodity diagrams on the daily casing, it tends to be utilized for different markets or time periods too.
• Crossovers between the +DI and - DI are in some cases utilized as trade signals as the crossover indicates the possibility of a recent fad emerging.