DMICE
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This script is designed as a technical analysis tool for trading platforms, specifically used to measure the strength and direction of market trends. It processes historical price data to identify whether the market is moving upward (bullish), downward (bearish), or sideways (choppy).
Core Logic Overview
The logic operates by breaking down price movements into two primary components: Plus Directional Movement (+DI) and Minus Directional Movement (-DI). By comparing these two values against a baseline of total volatility, the script determines which direction has more momentum.
1. Identifying Price Movement
The script first looks at the high and low prices of current bars compared to previous ones:
- Upward Movement: It calculates how much higher the current price went compared to the previous high. If the move is positive, it contributes to the "Plus" indicator.
- Downward Movement: It calculates how much lower the current price dropped compared to the previous low. If the move is negative, it contributes to the "Minus" indicator.
- Filtering: To ensure accuracy, the script ignores instances where movement is negligible or contradictory, focusing only on clear directional shifts.
2. Volatility Normalization (TR)
To keep the data consistent, the script calculates the "True Range." This represents the total volatility of a candle, taking into account the distance between the highest high and lowest low, as well as the distance from the previous closing price. By dividing the directional movements by this True Range, the script creates a percentage-based score for both upward and downward strength.
3. Smoothing the Data
Raw market data is often "noisy" and jumpy. To make the indicator readable for human traders, the script applies an Exponential Moving Average (EMA) to the Plus and Minus scores. This smooths out sudden spikes, allowing the trader to see the sustained trend rather than temporary price flickers.
4. Measuring Trend Strength (DX)
Finally, the script calculates the difference between the smoothed Plus and Minus indicators.
- If the Plus indicator is significantly higher than the Minus, the trend is strongly bullish.
- If the Minus indicator is significantly higher, the trend is strongly bearish.
- If they are close together, the market is considered to be in a range or consolidating without a clear direction.
Summary for the User
This tool provides a visual representation of market "health." Instead of just telling you where the price is, it tells you how fast and in what direction the price is moving. It filters out the "noise" of minor price fluctuations to highlight the underlying momentum of the trend, helping traders decide whether to enter a position or stay on the sidelines.
//+------------------------------------------------------------------+
//| ADX.mq4 |
//| Copyright © 2004, MetaQuotes Software Corp. |
//| http://www.metaquotes.net/ |
//+------------------------------------------------------------------+
#property copyright "Copyright © 2004, MetaQuotes Software Corp."
#property link "http://www.metaquotes.net/"
#property indicator_separate_window
#property indicator_buffers 2
#property indicator_color1 LightSeaGreen
#property indicator_color2 YellowGreen
//#property indicator_color3 Wheat
//---- input parameters
extern int DMIPeriod=10;
//---- buffers
//double ADXBuffer[];
double PlusDiBuffer[];
double MinusDiBuffer[];
double PlusSdiBuffer[];
double MinusSdiBuffer[];
double TempBuffer[];
//+------------------------------------------------------------------+
//| Custom indicator initialization function |
//+------------------------------------------------------------------+
int init()
{
//---- 3 additional buffers are used for counting.
IndicatorBuffers(5);
//---- indicator buffers
// SetIndexBuffer(0,ADXBuffer);
SetIndexBuffer(0,PlusDiBuffer);
SetIndexBuffer(1,MinusDiBuffer);
SetIndexBuffer(2,PlusSdiBuffer);
SetIndexBuffer(3,MinusSdiBuffer);
SetIndexBuffer(4,TempBuffer);
//---- name for DataWindow and indicator subwindow label
IndicatorShortName("DMI("+DMIPeriod+")");
// SetIndexLabel(0,"ADX");
SetIndexLabel(0,"+DI");
SetIndexLabel(1,"-DI");
//----
// SetIndexDrawBegin(0,DMIPeriod);
SetIndexDrawBegin(0,DMIPeriod);
SetIndexDrawBegin(1,DMIPeriod);
//----
return(0);
}
//+------------------------------------------------------------------+
//| Average Directional Movement Index |
//+------------------------------------------------------------------+
int start()
{
double pdm,mdm,tr;
double price_high,price_low;
double pr=1.0/(DMIPeriod);
int starti,i,counted_bars=IndicatorCounted();
//----
i=Bars-2;
PlusSdiBuffer[i+1]=0;
MinusSdiBuffer[i+1]=0;
if(counted_bars>=i) i=Bars-counted_bars-1;
starti=i;
//----
while(i>=0)
{
price_low=Low[i];
price_high=High[i];
//----
pdm=price_high-High[i+1];
mdm=Low[i+1]-price_low;
if(pdm<0) pdm=0; // +DM
if(mdm<0) mdm=0; // -DM
if(pdm==mdm) { pdm=0; mdm=0; }
else if(pdm<mdm) pdm=0;
else if(mdm<pdm) mdm=0;
//---- âû÷èñëÿåì èñòèííûé èíòåðâàë
double num1=MathAbs(price_high-price_low);
double num2=MathAbs(price_high-Close[i+1]);
double num3=MathAbs(price_low-Close[i+1]);
tr=MathMax(num1,num2);
tr=MathMax(tr,num3);
//---- counting plus/minus direction
if(tr==0) { PlusSdiBuffer[i]=0; MinusSdiBuffer[i]=0; }
else { PlusSdiBuffer[i]=100.0*pdm/tr; MinusSdiBuffer[i]=100.0*mdm/tr; }
//----
i--;
}
//---- last counted bar will be recounted
if(counted_bars>0) counted_bars--;
int limit=Bars-counted_bars;
//---- apply EMA to +DI
for(i=0; i<=limit; i++)
//---- main calculation loop
PlusDiBuffer[i]=PlusSdiBuffer[i]*pr+PlusDiBuffer[i+1]*((DMIPeriod-1)/DMIPeriod);
//---- apply EMA to -DI
for(i=0; i<=limit; i++)
MinusDiBuffer[i]=PlusSdiBuffer[i]*pr+MinusDiBuffer[i+1]*((DMIPeriod-1)/DMIPeriod);
//---- Directional Movement (DX)
i=Bars-2;
TempBuffer[i+1]=0;
i=starti;
while(i>=0)
{
double div=MathAbs(PlusDiBuffer[i]+MinusDiBuffer[i]);
if(div==0.00) TempBuffer[i]=0;
else TempBuffer[i]=100*(MathAbs(PlusDiBuffer[i]-MinusDiBuffer[i])/div);
i--;
}
//---- ADX is exponential moving average on DX
// for(i=0; i<limit; i++)
// ADXBuffer[i]=iMAOnArray(TempBuffer,Bars,DMIPeriod,0,MODE_EMA,i);
//----
return(0);
}
//+------------------------------------------------------------------+
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