DI - Directional Indicator

The Directional Indicator or DI is a somewhat complex momentum indicator developed by J. Welles Wilder and explained in his book New Concepts in Technical Trading Systems published in 1978.

Most indicators have a main weakness: they are not suitable for markets with strong or weak trends.

The main characteristic of the Directional Indicator is that it first identifies whether the market is in a trend before providing a signal.

DI is one of the components of the Directional Movement Index (DMI): it equals the difference between +DI and -DI.

Example

Interpretation

DI is displayed as a histogram, green when the trend is bullish and red when the trend is bearish.
To filter significant trends, a threshold around zero should be taken into account. The value of this threshold must be adapted for each security by observing the DI evolution for the analyzed periodicity.