Power of Trading
Learn how to use the proprietary DMI Forex trading strategy, which identifies where smart money is being placed, to steal daily pips from the Forex market. This strategy, based on the Directional Movement Index indicator, can be applied to any financial instrument, including stocks, commodities, cryptocurrencies, and currencies. The DMI is a trend trading indicator that is composed of three lines, with the ADX line measuring the strength of the trend. By using multiple time frame analysis, traders can improve their trading and make better trades with more pips. The DMI trading strategy involves determining the dominant trend, switching to the one-hour time frame, waiting until the DMI plus line breaks above the DMI line, entering a long position when the ADX line breaks above the 20 level, hiding the protective stop loss below the last swing point, and taking profit when the ADX touches the 40 level.
Introduction
Forex trading can be a lucrative venture, but only if you have the right strategy in place. In this video, we introduce a new proprietary DMI Forex trading strategy that helps you steal pips from the Forex market on a daily basis. The Directional Movement Index (DMI) strategy will teach you how to identify where the smart money is placing their funds and how to incorporate this strategy into your trading activities to make better trades and more pips.
What is the Directional Movement Index (DMI)?
The DMI is a trend trading indicator developed by Wells Wilder, who also invented one of the most popular overbought and oversold indicators, the RSI. The DMI uses a scale from 0 to 100 that identifies the price direction and the strength of the trend. You can use the DMI to accurately forecast future trends in the Forex market, and it can be used to trade any financial instrument, including stocks, commodities, cryptocurrencies, and currencies.
How the DMI Indicator Works
The DMI Indicator is composed of three lines. The first is the ADX, which is non-directional, so it will quantify the strength of the trend regardless of whether it is bullish or bearish. The ADX line is derived from the relationship of the DMI+ and DMI- lines. The second line is the DMI+, which measures the strength of the upward price movement, while the third line is the DMI-, which measures the strength of the downward price movement.
The DMI+ moves in tandem with the price. When the price rises, the DMI+ rises, and when the price falls, the DMI+ falls. Conversely, the DMI- moves counter-directional to the price. When the DMI+ line is rising and above the DMI- line, the trend is up. When the DMI- line is rising and above the DMI+ line, the trend is down.
Using the ADX Line to Measure the Strength of the Trend
While we use the DMI+ and DMI- lines to gauge the direction of the trend, we use the ADX line to measure the strength of the trend. According to textbook rules, an ADX reading above 25 signals the presence of a strong trend. However, by using an ADX reading above 20 levels, we can get much more accurate entry signals.
Catching the Trend with the DMI Indicator
All the information you need to be successful at trading is already available to you; you just have to train your brain to see it. The Directional Movement Index strategy will make it easier for you to see only the elements that really matter when you read the price chart. If you want to identify high probability trades, follow this step-by-step trend following guide.
The DMI Buy-Side Step-by-Step Guide
Use the daily chart to determine the dominant trend: the DMI+ line needs to be above the DMI- line. The ADX line needs to cross above the 20 level. Draw a horizontal line in the DMI Indicator window at the 20 level.
Switch to the one-hour time frame and wait until the DMI+ line breaks above the DMI- line. Make sure the lower time frame aligns with a higher time frame trend.
Enter a long position when the ADX line breaks above the 20 level. The strength of the trend is enough to boost the bullish momentum, increasing your chances of having a profitable trade.
Hide your protective stop-loss below the last swing point, giving enough room for your trades to work. Make sure not to be stopped out prematurely.
Take profit when the ADX touches the 40 level. An ADX reading of 40 indicates that the trend is overextended, and we should now expect the trend to lose its bullish momentum.
Conclusion
In summary, the DMI Forex trading strategy offers a simple yet effective way to trade the market. By following the steps outlined in this article, you can effectively identify high probability trades and significantly increase your chances of making profitable trades. Remember to always trade in the direction of the dominant trend and to use protective stop-losses to preserve your account balance.
