Dynamic Momentum Index


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Dynamic Momentum Index

A technical measure indicating whether a security is overbought or oversold. It is calculated thusly:

DMI = 100 - (100 / (1 + RS)) where RS is the average measure of the security's price on days it closes up divided by the average price on days it closes down.

A DMI over 70 means that a security is overbought while a measure under 30 means that the security is oversold. The measure is similar to a relative strength index, with the main difference being the length of time accounted in the RS measure. The DMI uses shorter time periods when volatility is high and longer periods when it is low.
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