For smoothing purposes, a 5-day EMA is applied to the resulting oscillator. The indicator fluctuates above and below zero. Generally, directional movement favors the bulls when DMI Net is positive and favors the bears when negative. As with many oscillators, positive and negative divergence can be useful as well as movements above and below the 10-day EMA, which acts as the trigger line. Volume is incorporated with price action to measure each period's buying or selling pressure.
Candlesticks are a unique and practical means to easily gauge buying and selling pressure.
Our method captures the essence of each candlestick as a positive or negative number and can be calculated on a daily, weekly or monthly basis. In addition to this, we also filter in the effects of gap openings and wide ranging days. Below are some single candlesticks with a brief explanation of their effect on the numerical value of the period's price action. The high wave candle is representative of indecisiveness. Neither the bulls nor the bears can gain control.