Description
The TAC_DMI strategy is based on trading system described in BC Low's article "Identify the Start of a Trend with DMI"; it uses three technical indicators: TAC_ADX, TAC_DIPlus, and TAC_DIMinus. These indicators attempt to identify start and end points of trend, market tops, and market bottoms.
Long Entry signal is generated when TAC_DIPlus clusters below level 10 and its lower line reaches level 5 while TAC_ADX cluster turns down from level 70.
Short Entry signal is generated when TAC_DIMinus clusters below level 10 and its lower line reaches level 5 while TAC_ADX cluster turns down from level 70.
Main signals are accompanied with additional ones indicating that a trend might be emerging or terminating. Signal of possible trend start is given when TAC_ADX cluster turns up from below 30; a stronger version of this signal occurs when the cluster turns up from below 20. The other signal suggests trend termination, it is generated when TAC_ADX cluster turns up from below 70. For a stronger version of this signal, consider level 90 instead. Although TAC_DMI strategy does not add simulated orders upon trend start/termination signals, they are marked on chart and can be used for confirmation of the main ones.
Input Parameters
| Parameter | Description |
|---|---|
adx length1
|
The number of bars used to calculate the first ADX for TAC_ADX. |
adx length2
|
The number of bars used to calculate the second ADX for TAC_ADX. |
adx length3
|
The number of bars used to calculate the third ADX for TAC_ADX. |
di length1
|
The number of bars used to calculate the first plot of both DI+ and DI-. |
di length2
|
The number of bars used to calculate the second plot of both DI+ and DI-. |
di length3
|
The number of bars used to calculate the third plot of both DI+ and DI-. |
tolerance
|
The tolerance coefficient used in cluster identification. Setting this value to zero will define the cluster as intersection of the three lines at a single point. |
|
|
The type of moving average to be used in calculations: simple, exponential, weighted, Wilder's, or Hull. |
Plots
| Plot | Description |
|---|---|
Signal1
|
Additional signals indicating that the trend might be emerging. |
Signal2
|
Additional signals indicating that the trend might be terminating. |
Further Reading
1. "Identify the Start of a Trend with DMI" by BC Low. Technical Analysis of Stocks & Commodities, November 2012.
Backtesting is the evaluation of a particular trading strategy using historical data. Results presented are hypothetical, and there is no guarantee that the same strategy implemented today would produce similar results.
Technical analysis is not recommended as a sole means of investment research.
For educational purposes only. Not a recommendation of a specific security or investment strategy.