DMISignal(String,Series,Int32,Int32) Method

Evaluates what is know as the Directional Motion Indicator (MDI) Trading Signal.

Syntax

Visual Basic
C#

'Declaration
 
Public Overloads Shared Function DMISignal( _
   ByVal seriesName As String, _
   ByVal s As Series, _
   ByVal method As Integer, _
   ByVal lengthOfMA As Integer _
) As Series

'Usage
 
Dim seriesName As String
Dim s As Series
Dim method As Integer
Dim lengthOfMA As Integer
Dim value As Series
 
value = FinancialEngine.DMISignal(seriesName, s, method, lengthOfMA)

public static Series DMISignal( 
   string seriesName,
   Series s,
   int method,
   int lengthOfMA
)

Parameters

seriesName

The name of the series which will be displayed on the chart, i.e. its label.

s

A financial series where the first element contain the prices of last trading period, the second element represents the prices of the previous periods and so on. Please note that in order to calculate this indicator the elements of the financial series must contain High, Low and Close values.

method

Determines the methods used for the evaluation of the moving average in accordance with the following key:

1 = Simple moving average
2 = Geometric moving average
3 = Linearly weighted moving average
4 = Exponentially Weighted Moving average within smoothing fact set to be 0.5.

For further details concerning the definition of these moving averages please see the accompanying PDF documentation or the API documentation for SimpleMovingAverage(String,Series,ElementValue,Int32).

lengthOfMA

The number of periods over which the moving average is considered.

Return Value

Returns -1, 0, or 1 respectively according to whether a sell, no action or buy signal is generated.

Remarks

This signal determines whether a given asset or index should be sold, brought or no action should be taken for a given asset under consideration. This trading signal forms the basis of the DMI Trading System which was developed by Welles Wilder.

At its simplest level to DMI system states that when the PDI crosses above the MDI a buy signal is generated and when the MDI crosses above the PMI then a sell signal is generated. This however may generate an excessive number of signals and hence we offer the possibility to smooth out these indicators according to a moving average which will help to reduce to sensitivity of the trading system.

Advantages to this Approach

This trading approach will reveal a trend before it is detected by most market participants. Once the trend becomes more widely recognized other market participants will tend to buy the tend and hence re-enforcing the trend dynamics. Hence the DMI system offers a good risk/reward trend following system.

Requirements

Target Platforms: Windows 7, Windows Vista SP1 or later, Windows XP SP3, Windows Server 2008 (Server Core not supported), Windows Server 2008 R2 (Server Core supported with SP1 or later), Windows Server 2003 SP2

Reference

FinancialEngine Class
FinancialEngine Members
Overload List