DMI
filter checks any trading signal and validates or invalidates it according
to the market's condition. This condition is determinated by the DMI value
:
-
Market
in trend = ADX
> threshold,
- Flat
Market = ADX
< threshold.
Default value for threshold is 17.
Filtering Example : DMI 14, threshold 17
Filtering
Examples
DJI
Prices x MA 15
DJI
Prices x MA 15
DMI 14 Filter
Advantages and Disadvantages of DMI Filter -
Because of DMI inertia, the beginning and the end of a flat market are
detected late. The first trades of a flat market are not invalidated while
others are wrongly invalitaded. For example, the first trades of the flat
market from nov 00 to june 01 are not invalitaded by the filter who did
not detect the flat market. + Filtering
removes a large part of flat market zones (the 'eagle nests' of the first
graphic).