Saturday, March 1st, 2014 by Michael Freeman
In a constantly evolving and changing financial market the ability and likelihood that a trader will get an edge over the markets are slim to none. Experience and research will ultimately lead you in the path and will determine whether or not you will be successful as a trader or not. For those of who you like trend trading indicators and strategies then this writing is for you. Today we are going to cover the basics and implementation of the directional moving index indicator otherwise known as the DMI indicator.
Moving into the basics of this indicator we will notice that the indicator is composed of two lines that are similar to moving averages where both are set at a period of 15. When using this indicator you need a chart solution such as Free Stock Charts where the indicator already has preset values so no editing of the indicator is needed. The indicator is composed of a DI plus and a DI minus which is where the two lines originate from. In the picture below you can see an example of how this indicator looks when applied to a charting solution.
Setting up the DMI indicator is easy to do and is perhaps the most pertinent step before applying into a binary options trading strategy. The first thing that we want to make sure of is that our asset displays a relatively low amount of volatility. This is because assets that display behavior of high volatility oftentimes are harder to predict and less likely to go in the direction you want. Some assets that display relatively low volatility would be the EUR/USD, Gold and Silver. The next thing we want to make sure is that our time frame is set no less than 15 minutes and no more than 30 minutes. Any time frames ranging outside of these suggestions hinder and effect the accuracy of the trading signals generated.
Now that we have the proper setup we can focus on the implementation of this strategy. In the picture below you can see an example of how this strategy is applied. When it comes to trading this indicator the green line is known as our signal line. When the green line crosses our red line in a upward or downward direction and there are matching candle types above the break then we go ahead and place our trade. So if we have a downward break in progress we want to make sure bearish candles are over the break and vice versa for an upward break.
Trading binary options is not as easy as it is made out but if you stayed dedicated and keep working at it your chances of succeeding in this tough career field increases significantly. Making sure you have the right setup is crucial and will ultimately decide whether your not you succeed when using this indicator and strategy. The DMI indicator is a great trend trading indicator that can yield high success when trading binary options. If you have any more questions please feel free to leave comment of question below.