Interpreting DM
In Wilder's "New Concepts in Technical Trading Systems", his primary interpretation of
Directional Movement is a simple cross over of +DM and -DM.
We have placed buy/sell red/green
tics on the dates where the yellow and purple +DM and -DM cross.
The timing converts a
-32% annualized return to a positive 55% return.
For mutual funds with modest volatility, a concept
worth exploring is using AccuTrack to create trades between the +DM and -DM lines. See the
discussion about moving yellow lines to the T Chart for
detailed analysis.
Like most technical indicators, DM always reduces risk which always improves performance in
bear markets. However, return is reduced in bull markets. |