When the DMI Indicator is selected, the stock chart will plot the Positive Directional Indicator (+DI), Negative Directional Indicator (-DI) and Average Directional Index (ADX - not Shown in graph below). +DI is green and -DI is red. +DI measures the force of the up moves and -DI measures the force of the down moves over a set period. The default setting is 14 periods, but users are encouraged to modify these settings according to their personal preferences.

In its most basic form, buy and sell signals can be generated by +DI/-DI crosses. A buy signal occurs when +DI moves above -DI and a sell signal when -DI moves above the +DI. Be careful, though; when a security is in a trading range, this system may produce many whipsaws. As with most technical indicators, +DI/-DI crosses should be used in conjunction with other aspects of technical analysis.

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ADX combines +DI with -DI and then smoothes the data with a moving average to provide a measurement of trend strength. Because it uses both +DI and -DI, ADX does not offer any indication of trend direction, just strength. Generally, readings above 40 indicate a strong trend and readings below 20 a weak trend. To catch a trend in its early stages, you might look for stocks with ADX advances above 20. Conversely, an ADX decline from above 40 might signal that the current trend is weakening and a trading range may develop.

In the figure below you can see an example of both the MACD and DMI indicators. There is a direct correlation between both indicators telling us that there is a buying point for stock XYZ around $27. A divergence occurs in both indicators as we can see the positive blue line cross above the negative red line. This would be our buy point. A sell point would occur with the positive blue line crossing back underneath the red line.