when di is above di the price has more upward pressure than downward pressure conversely if di is above di the price has more downward pressure this helps traders assess the trend direction crossovers between the lines are also used as signals to buy or sell below we show you how to employ the dmi in trading compare it to other indicators and review some of its limits 
formulas for the directional movement index dmi di smoothed dm atr 1 0 0 di smoothed dm atr 1 0 0 dx di di di di 1 0 0 where dm directional movement current high ph ph previous high dm previous low current low smoothed dm t 1 1 4 dm t 1 1 4 dm 1 4 cdm cdm current dm atr average true range begin aligned text di left frac text smoothed dm text atr right times 100 text di left frac text smoothed dm text atr right times 100 text dx left frac mid text di text di mid mid text di text di mid right times 100 textbf where text dm directional movement text current high text ph text ph text previous high text dm text previous low text current low text smoothed dm textstyle sum t 1 14 text dm left frac sum t 1 14 text dm 14 right text cdm text cdm text current dm text atr text average true range end aligned di atr smoothed dm 100 di atr smoothed dm 100dx di di di di 100where dm directional movement current high phph previous high dm previous low current lowsmoothed dm t 114 dm 14 t 114 dm cdmcdm current dmatr average true range calculating the directional movement index