What Is Minus Directional Indicator (-DI)

The Directional Indicator was developed in 1978 by J. Welles Wilder as an indicator of trend strength in a financial instrument’s prices.

Plus DI represents an absolute up movement, and Minus DI represents absolute down movement.

Here please note that “+” and “-” denotes only upward and downward movement. “-DI” is not a negative number. But a positive number of a downward movement.

The Negative Directional Indicator (-DI) measures the presence of a downtrend and is part of the Average Directional Index (ADX). If -DI is sloping upward, it’s a sign that the price downtrend is getting stronger. This indicator is nearly always plotted along with the Positive Directional Indicator (+DI).

-DI Indicator

-DI is a momentum indicator and is used to measure the presence of a downtrend. It is part of the Average Directional Index (ADX) along with +DI. The ADX reveals trend direction and trend strength.

How To Calculate -DI

Formula:- Directional Movement calculations are below. The moving average used is the one originally defined by Wilder is the Smoothed Moving Average(SMMA)

  • upmove = high – high(-1)
  • downmove = low(-1) – low
  • -dm = downmove if downmove > upmove and downmove > 0 else 0
  • -di = 100 * SimpleMovingAverage(-dm, period) / atr(period)

Why Use -DI

-DI, along with +DI, was initially designed for commodities but is now used on all major financial markets. The indicator can indicate the market trend, and if the -DI moves up above the +DI, the price downtrend is getting stronger. On the other hand, when -DI moves down and goes below the +DI, the price uptrend is stronger. This can help traders enter and exit the market effectively.

How to Use -DI Trading Strategy

Bullish Scenario:- Since the indicator shows the strength of the downtrend, a lower -DI value will indicate a price increase, meaning a bullish scenario.

Bearish Scenario:- Similarly, in case of an increase in -DI will indicate a strong downtrend, thus leading to a bearish scenario.

Minus Directional Indicator (-DI) Trading Strategy

Building -DI Trading Strategy in Mudrex

Strategy:- 

BUY:- -DI(14 days) crosses down -DI(30 days)

SELL:- -DI(14 days) crosses up -DI(30 days)

TIME FRAME:- 4Hrs

Creating on Mudrex:- 

We will use 2 WMAE compare blocks—one for selling and one for buying.

For buying, we will use the following settings:-

Minus Directional Indicator (-DI) Trading Strategy

For selling, we will use the following settings:-

Final Strategy:-

Minus Directional Indicator (-DI) Trading Strategy

Testing:- 

Running on Binance Futures: BTC/USDT with tick interval of 4H yielded an overall profit of 57.95%

Backtesting on Mudrex

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