Replies to post #181 on THE BULL & BEAR

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Part Three:
DMI Momentum
The great feature of DMI is the ability to see buying and selling pressure at the same time, allowing the dominant force to be determined before entering a trade. The strength of a swing high (bulls) is reflected in the +DMI peak, and the strength of a swing low (bears) is seen in the -DMI peaks. The relative strength of the DMI peaks tells the momentum of price and provides timely signals for trading decisions. When the buyers are stronger than the sellers, the +DMI peaks will be above 25 and the -DMI peaks will be below 25. This is seen in a strong uptrend. But when the sellers are stronger than the buyers, the -DMI peaks will be above 25 and the +DMI peaks will be below 25. In this case, the trend will be down.

The ability of price to trend depends on continued strength in the dominant DMI. A strong uptrend will show a series of rising +DMI peaks that remain above the -DMI for extended periods of time (Figure 3). The opposite is true for strong downtrends. When both DMI lines are below 25 and moving sideways, there is no dominant force and trend trades are not appropriate. However, the best trends begin after long periods where the DMI lines cross back and forth under the 25 level. A low risk trade setup will occur after DMI expands above the 25 level and price penetrates support/resistance.