by Jim Summers, Ph.D.
Believe it or not, all the work we've done so far programming Lotus does not complete the Directional
Movement Index system (DMI). We also must include message modules — the only way some correct
signals can come from your computer.
For example, virtually every commentator says crossing DI14 lines is the trading signal. Actually, DMI
developer J. Welles Wilder notes that this is only the first indication a trade should be considered. Before
entering a trade, several other criteria must be met. The ADX line — the one which indicates the
existence of a trend—must be in a well-defined relationship with the DI14 lines, otherwise the signal is to
Another example is the whipsaw problem. Wilder developed the Extreme Point Rule which gives a
specific price at which to ignore crossing lines that are signaling an exit or reversal. If the extreme point
is not hit, don't get out or reverse position.
When an important criterion cannot be graphed, the limits of a charting program have been reached —
besides which I do not enjoy staring intently at little blips on bar charts or squiggles in lines. Fortunately,
putting in message modules is quick and, as you will see, also can aid in debugging.