DirectionalMovementIndicator (WebCab Technical Analysis v1.1 (J2SE Edition))

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webcab.lib.finance.trading.indicators
Class DirectionalMovementIndicator

java.lang.Object
  |
  +--webcab.lib.finance.trading.indicators.DirectionalMovementIndicator

All Implemented Interfaces:: Serializable

public class DirectionalMovementIndicator
extends Object
implements Serializable

Implements the Directional Movement Indicator (MDI) and Average Directional Indicator (ADX) which was first developed by Wellas Wilder in order to classify price moves and trends. These ideas where first made public within Wilder's first book "New Concepts in Technical Trading Systems" (Dec 1978).

The techniques described here where originally developed in the process of developing a trading system and can still be used in this way. Today these methods are most commonly used to evaluate the strength of a price move or trend. Care should be taken with the direct application of this approach since it was first developed and applied to markets with exhibited lower volatility than todays markets.

The central idea of this approach is to compare the range of price of two subsequent periods and from this information infer the overall direction of the market. In order to ensure the stability of the indicators a moving average is often used in conjunction with the basic indicators. For further details please see the PDF documentation.

One Period and Multi Period Versions

For many of the indicators we provide essentially two versions of the same method. The first version evaluates the indicator over the entire period given and the second version evaluates the indicator over all the sub-periods of a given length. Moreover, the version which evaluates over all sub-periods of a given length will return the results as an array where the 1st term of the array will be the value associated with the most recent sub-period, and the previous element corresponding to the previous sub-period and so on.

The naming of these two versions will follow the convention that if the indicator which evaluates over the entire period and returns a single element is named ABCIndicator, then the corresponding indicator over all sub-periods (of a given length) which returns an array will be denoted by ABCIndicatorOverPeriod.

For example, if our source data has N elements then the two versions of a given indicator, where the number of periods used within the sub-periods is n would correspond to:

ABCIndicator - Evaluation of the indicator over the whole period of length N.
ABCIndicatorOverPeriod - Will return an array where the first term is the value of the indicator ABCIndicator on the most recent n periods, and the next term is the value of the indicator ABCIndicator on the previous n+1 periods minus the most recent period and so on. That is, for each iterative evaluation 'the window of evaluation' is shifted one place back.

See Also:: Serialized Form

Constructor Summary

DirectionalMovementIndicator()
          Creates a new instance.

Method Summary

double averageDailyTrueRange(double[] trueRange)
          Evaluates the x-day Average Daily True Range (ADTR) of an asset.

int classifyMovements(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow)
          Determines whether todays price action represents an (up or down) trend, (up or down) gap, or an (inner or outer) range.

double directionalMotion(double plusDirectionalMovement, double minusDirectionalMovement)
          Calculates the Directional Indicator which forms the main part of the Directional Movement System developed by Wellas Wilder over a number of periods.

double directionalMotion(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow, double yesterdaysClose)
          Evaluates the Directional Movement Indicator (DMI) which forms the main part of the Directional Movement System developed by Wellas Wilder using only price data.

double[] directionalMotionPeriod(double[] plusDirectionalMovement, double[] minusDirectionalMovement)
          Calculates the Directional Indicator which forms the main part of the Directional Movement System developed by Wellas Wilder.

int dmiSignal(double[] pdi, double[] mdi, int method)
          Evaluates what is know as the Directional Motion Indicator (MDI) Trading Signal.

int[] dmiSignalPeriod(double[] pdi, double[] mdi, int method, int lengthOfMA)
          Evaluates what is know as the Directional Motion Indicator (MDI) Trading Signal.

double minusDirectionalMovement(double trueRange, double minusDirectionalMovement)
          Evaluates the Minus Directional Movement Indicator (DMI) of the Current Bar.

double minusDirectionalMovement(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow)
          Evaluates the Minus Directional Movement (MDM).

double minusDirectionalMovement(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow, double yesterdaysClose)
          Evaluates the Minus Directional Movement Indicator (MDMI) of the Current Bar using price data only.

double[] minusDirectionalMovementPeriod(double[] high, double[] low, double[] close)
          Evaluates the Minus Directional Movement Indicator (MDMI) over a number of periods using price data only.

double plusDirectionalMovement(double trueRange, double positiveDirectionalMovement)
          Calculates the Plus Directional Movement Indicator (DMI) of the Current Bar.

double plusDirectionalMovement(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow, double yesterdaysClose)
          Evaluates the Plus Directional Movement Indicator (PDMI) of the Current Bar using price data only.

double[] plusDirectionalMovementPeriod(double[] high, double[] low, double[] close)
          Evaluates the Plus Directional Movement Indicator (PDMI) over a number of periods using price data only.

double positiveDirectionalMovement(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow)
          Evaluates the Positive Directional Movement (PDM).

double trueRange(double high, double low, double previousClose)
          Finds the True Range (TR) for a given traded asset over a given period.

double[] trueRangePeriod(double[] highs, double[] lows, double[] closing)
          True Range (TR) of a traded asset over a number of periods.

double[] twoDoubles2Array(double first, double second)
          Utility method used within client applications in order to write two doubles within an array of length 2.

double wilderAverageDirectionalMotion(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow, double yesterdaysClose, double nDaysHigh, double nDaysLow, double yesterdaysNDaysHigh, double yesterdaysNDaysLow, double yesterdaysNDaysClose)
          Evaluates the Average Directional Movement Index Rating (ADXR), which is a component of the Directional Movement System developed by Welles Wilder.

Methods inherited from class java.lang.Object

clone, equals, finalize, getClass, hashCode, notify, notifyAll, toString, wait, wait, wait

Constructor Detail

DirectionalMovementIndicator

public DirectionalMovementIndicator()

Creates a new instance.

Method Detail

classifyMovements

public int classifyMovements(double todaysHigh,
                             double todaysLow,
                             double yesterdaysHigh,
                             double yesterdaysLow)

Determines whether todays price action represents an (up or down) trend, (up or down) gap, or an (inner or outer) range. The classification of the price movement will be required by the Directional Movement Indicator (DMI) approach in comparing the previous days price action to todays price action.

Trends, Gaps and Ranges

Here we detail explicitly what we mean by the terms trend, gap and range. We compare the range of the todays price with yesterdays range of prices and classify the price dynamics according to the following categories:

Up Trend - if (todaysHigh > yesterdaysHigh) and (todaysLow > yesterdaysLow)
Down Trend - if (todaysHigh < yesterdaysHigh) and (todaysLow < yesterdaysLow)
Gap Up - if (todaysHigh > yesterdaysHigh) and (todaysLow > yesterdaysHigh)
Gap Down - if (todaysHigh < yesterdaysLow) and (todaysLow < yesterdaysLow)
Outer Range - if (todaysHigh ≥ yesterdaysHigh) and (todaysLow ≤ yesterdaysLow)
Inner Range - if (todaysHigh ≤ yesterdaysHigh) and (todaysLow ≥ yesterdaysLow)

where:

todaysHigh - the highest traded value which the asset under consideration takes during todays market action
todaysLow - the lowest traded value which the asset under consideration takes during todays market action
yesterdaysHigh - the highest traded value which the asset under consideration takes during yesterdays market action
yesterdaysLow - the lowest traded value which the asset under consideration takes during yesterdays market action

Remarks:

The above cases cover all possible scenarios.
This method may be applied to the calibration of the parameter of a trading system which depends on the DMI.

Parameters:

todaysHigh - the highest traded value which the asset under consideration takes during todays market action

todaysLow - the lowest traded value which the asset under consideration takes during todays market action

yesterdaysHigh - the highest traded value which the asset under consideration takes during yesterdays market action

yesterdaysLow - the lowest traded value which the asset under consideration takes during yesterdays market action

Returns:

Returns an integer depending on the classification of the past two days price action. Where the integer returned is in accordance with the following key:

Up Trend = 1
Down Trend = 2
Up Gap = 3
Down Gap = 4
Outer Range = 5
Inner Range = 6

Throws:

IllegalArgumentException - thrown if any of the parameters todaysHigh, todaysLow, yesterdaysHigh or yesterdaysLow is a strictly negative number.

positiveDirectionalMovement

public double positiveDirectionalMovement(double todaysHigh,
                                          double todaysLow,
                                          double yesterdaysHigh,
                                          double yesterdaysLow)

Evaluates the Positive Directional Movement (PDM).

Parameters:: todaysHigh - the highest traded value which the asset under consideration takes during todays market action; todaysLow - the lowest traded value which the asset under consideration takes during todays market action; yesterdaysHigh - the highest traded value which the asset under consideration takes during yesterdays market action; yesterdaysLow - the lowest traded value which the asset under consideration takes during yesterdays market action
Returns:: Double value of the Positive Directional Movement (PDM) corresponding to the last two trading days.
Throws:: IllegalArgumentException - thrown if any of the parameters todaysHigh, todaysLow, yesterdaysHigh or yesterdaysLow is a strictly negative number.

minusDirectionalMovement

public double minusDirectionalMovement(double todaysHigh,
                                       double todaysLow,
                                       double yesterdaysHigh,
                                       double yesterdaysLow)

Evaluates the Minus Directional Movement (MDM).

Parameters:: todaysHigh - the highest traded value which the asset under consideration takes during todays market action; todaysLow - the lowest traded value which the asset under consideration takes during todays market action; yesterdaysHigh - the highest traded value which the asset under consideration takes during yesterdays market action; yesterdaysLow - the lowest traded value which the asset under consideration takes during yesterdays market action
Returns:: Double value Minus Directional Movement corresponding to the last two trading days.
Throws:: IllegalArgumentException - thrown if any of the parameters todaysHigh, todaysLow, yesterdaysHigh or yesterdaysLow is a strictly negative number.

trueRange

public double trueRange(double high,
                        double low,
                        double previousClose)

Finds the True Range (TR) for a given traded asset over a given period. Also, described as the True Range (TR) of the current bar.

Parameters:: high - the highest traded value of the last trading period.; low - the lowest traded value of the last trading period.; previousClose - the closing price of the asset on the preceding trading period.
Returns:: A double which represents the value of the True Range of the consider asset for the latest trading period.
Throws:: IllegalArgumentException - thrown if any of the parameters high, low or previousClose is a strictly negative number.
See Also:: averageDailyTrueRange - Evaluates the x-day Average of the Daily True Range (ADTR)., trueRangePeriod - Evaluate the True Range (TR) over a number of trading periods.

trueRangePeriod

public double[] trueRangePeriod(double[] highs,
                                double[] lows,
                                double[] closing)

True Range (TR) of a traded asset over a number of periods. This method is a convenient means by which you are able to apply trueRange over a number of consecutive periods.

Parameters:: highs - a double array where a first term contains the value of the highest traded price during the last trading period considered, the second terms contains the highest traded price in the previous trading periods and on so.; lows - a double array where a first term contains the value of the lowest traded price during the last trading period considered, the second terms contains the lowest traded price in the previous trading periods and on so.; closing - a double array where a first term contains the value of the closing price during the last trading period considered, the second terms contains the closing price in the previous trading periods and on so.
Returns:: An array where the k-term corresponds to the True Range (TR) on the k-th previous period.
Throws:: IllegalArgumentException - thrown if the length of the array parameters high, low or closing, is not the same or if any elements of any one of these array's has a negative element.
See Also:: trueRange - Evaluate the True Range over a single period.

averageDailyTrueRange

public double averageDailyTrueRange(double[] trueRange)

Evaluates the x-day Average Daily True Range (ADTR) of an asset. This measure is often used as a measure of volatility. The ADTR is the simple moving average of daily true which can be evaluated using trueRange.

Parameters:: trueRange - an array of (positive) doubles of length x, where the first element is the true range over the last trading session, the second value of the true range range over the previous trading session and so on.
Returns:: The value of the x-day Average of the Daily True Range.
Throws:: IllegalArgumentException - thrown if any element of the array is strictly negative. The elements of the trueRange array cannot be strictly negative since they represent the (positive) true range's (TRs) of an asset over a period.
See Also:: trueRange - To evaluate the trueRange parameter.

plusDirectionalMovement

public double plusDirectionalMovement(double trueRange,
                                      double positiveDirectionalMovement)

Calculates the Plus Directional Movement Indicator (DMI) of the Current Bar.

Parameters:: trueRange - the true range of the Current Bar (i.e. todays) which can be evaluated using trueRange.; positiveDirectionalMovement - the positive directional movement of the asset over the past day which can be evaluated using positiveDirectionalMovement.
Returns:: The double value of todays Plus Directional Movement Indicator for the asset considered. Please note that if the asset price is constant over the period considered then the Plus Directional Movement Indicator is taken to be zero.
Throws:: IllegalArgumentException - thrown if the trueRange is not positive.
See Also:: trueRange - To evaluate the trueRange parameter., positiveDirectionalMovement - To evaluate the positive directional movement parameter.

minusDirectionalMovement

public double minusDirectionalMovement(double trueRange,
                                       double minusDirectionalMovement)

Evaluates the Minus Directional Movement Indicator (DMI) of the Current Bar.

Parameters:: trueRange - the true range of the Current Bar (i.e. todays); minusDirectionalMovement - the minus directional movement of the asset over the past day
Returns:: The double value of todays Minus Directional Movement Indicator for the asset considered. Please note that if the asset price is constant over the period considered then the Minus Directional Movement Indicator is taken to be zero.
Throws:: IllegalArgumentException - thrown if the trueRange is not positive.
See Also:: trueRange, minusDirectionalMovement

plusDirectionalMovement

public double plusDirectionalMovement(double todaysHigh,
                                      double todaysLow,
                                      double yesterdaysHigh,
                                      double yesterdaysLow,
                                      double yesterdaysClose)

Evaluates the Plus Directional Movement Indicator (PDMI) of the Current Bar using price data only.

Parameters:: todaysHigh - the highest traded value which the asset under consideration takes during todays market action; todaysLow - the lowest traded value which the asset under consideration takes during todays market action; yesterdaysHigh - the highest traded value which the asset under consideration takes during yesterdays market action; yesterdaysLow - the lowest traded value which the asset under consideration takes during yesterdays market action; yesterdaysClose - the close price of the asset the preceding day
Returns:: Double value of the Plus Directional Movement Indicator corresponding to the price action of the considered asset over the past two days. Please note that if the asset price is constant over the period considered then the Plus Directional Movement Indicator is taken to be zero.
Throws:: IllegalArgumentException - thrown if any of the parameters todaysHigh, todaysLow, yesterdaysHigh, yesterdaysLow or yesterdaysClose is not a positive number.

plusDirectionalMovementPeriod

public double[] plusDirectionalMovementPeriod(double[] high,
                                              double[] low,
                                              double[] close)

Evaluates the Plus Directional Movement Indicator (PDMI) over a number of periods using price data only.

Parameters:: high - an array where the first term is the intraday high over the most recent period, the second term is the high over the previous period and so on.; low - an array where the first term is the intraday low over the most recent period, the second term is the low over the previous period and so on.; close - an array where the first term is the intraday close over the most recent period, the second term is the close over the previous period and so on.
Returns:: Array with the k-th term corresponds to the PDMI of the k-th Bar. Please note that if the asset price is constant over any period considered then the Plus Directional Movement Indicator for that period is taken to be zero.
Throws:: IllegalArgumentException - throw when the three arrays high, low, close do not have the same length, or when any element of these three arrays is a strictly negative number.
See Also:: plusDirectionalMovement - evaluates the PDMI of the Current Bar using price data only

minusDirectionalMovement

public double minusDirectionalMovement(double todaysHigh,
                                       double todaysLow,
                                       double yesterdaysHigh,
                                       double yesterdaysLow,
                                       double yesterdaysClose)

Evaluates the Minus Directional Movement Indicator (MDMI) of the Current Bar using price data only.

Parameters:: todaysHigh - the highest traded value which the asset under consideration takes during todays market action; todaysLow - the lowest traded value which the asset under consideration takes during todays market action; yesterdaysHigh - the highest traded value which the asset under consideration takes during yesterdays market action; yesterdaysLow - the lowest traded value which the asset under consideration takes during yesterdays market action; yesterdaysClose - the close price of the asset the preceding day
Returns:: Double value of the Minus Directional Movement Indicator corresponding to the price action of the considered asset over the past two days. Please note that if the asset price is constant over the period considered then the Minus Directional Movement Indicator is taken to be zero.
Throws:: IllegalArgumentException - thrown if any of the parameters todaysHigh, todaysLow, yesterdaysHigh, yesterdaysLow or yesterdaysClose is not a positive number.

minusDirectionalMovementPeriod

public double[] minusDirectionalMovementPeriod(double[] high,
                                               double[] low,
                                               double[] close)

Evaluates the Minus Directional Movement Indicator (MDMI) over a number of periods using price data only.

Parameters:: high - an array where the first term is the intraday high over the most recent period, the second term is the high over the previous period and so on.; low - an array where the first term is the intraday low over the most recent period, the second term is the low over the previous period and so on.; close - an array where the first term is the intraday close over the most recent period, the second term is the close over the previous period and so on.
Returns:: Array with the k-th term corresponds to the MDMI of the k-th Bar. Please note that if the asset price is constant over any period considered then the Minus Directional Movement Indicator for that period is taken to be zero.
Throws:: IllegalArgumentException - throw when the three arrays high, low, close do not have the same length, or when any element of these three arrays is a strictly negative number.
See Also:: minusDirectionalMovement - evaluates the MDMI of the Current Bar using price data only

directionalMotion

public double directionalMotion(double todaysHigh,
                                double todaysLow,
                                double yesterdaysHigh,
                                double yesterdaysLow,
                                double yesterdaysClose)

Evaluates the Directional Movement Indicator (DMI) which forms the main part of the Directional Movement System developed by Wellas Wilder using only price data. When a trend is moving with strength, the directional indicator (ADX) will measure the strength of the trend by measuring the spread between the Plus directional Indicator (PDI) and Minus Directional Indicator (MDI).

Evaluation

The Directional Movement Indicator (DMI) can be summarized by the following formula:

Directional Movement Indicator = 100 * ( (PDM - MDM) / (PDM + MDM) ),

where PDM is the Plus Directional Movement (PDM) indicator over the last two trading periods which can be evaluated using plusDirectionalMovement and MDM is the Minus Directional Movement (MDM) indicator over the last two trading periods which can be evaluated using minusDirectionalMovement.

Interpretation

The Directional movement indicator has a range of [0,100], where to higher the value returned the stronger the trend is said to be. If a trend is reliable then the directional lines (PDM and MDM) will diverge and the indicator will increase. If on the other hand a trend starts to fail and price whip-saws (for example with price is within a trading range) the difference between the direction lines will decrease and the overall index will decrease.

Parameters:: todaysHigh - the highest traded value which the asset under consideration takes during todays market action; todaysLow - the lowest traded value which the asset under consideration takes during todays market action; yesterdaysHigh - the highest traded value which the asset under consideration takes during yesterdays market action; yesterdaysLow - the lowest traded value which the asset under consideration takes during yesterdays market action; yesterdaysClose - the closing price of the asset the preceding day
Returns:: The value of the Directional Movement Indicator corresponding to the last two trading periods.
Throws:: IllegalArgumentException - thrown if any of the parameters todaysHigh, todaysLow, yesterdaysHigh, yesterdaysLow or yesterdaysClose is not a positive number.
See Also:: plusDirectionalMovement, minusDirectionalMovement

directionalMotion

public double directionalMotion(double plusDirectionalMovement,
                                double minusDirectionalMovement)

Calculates the Directional Indicator which forms the main part of the Directional Movement System developed by Wellas Wilder over a number of periods. This indicator is generally evaluated using 14 periods and is used with the plusDirectionalMovement and minusDirectionalMovement indicators.

Evaluation

The Directional Movement Indicator can be summarized by the following formula:

Directional Movement Indicator = 100 * ( (PDM - MDM) / (PDM + MDM) ),

Interpretation

The directional indicator has a range of [0,100], where to higher the value returned the stronger the trend is said to be. If a trend is reliable then the smoothed directional lines (PDM and MDM) will diverge and the indicator will increase. If on the other hand a trend starts to fail and price whip-saws (for example with price is within a trading range) the difference between the smoothed direction lines will decrease and the overall index will decrease.

Parameters:: plusDirectionalMovement - the value of the Plus Directional Movement indicator corresponding to the last two trading periods. See plusDirectionalMovement for more details.; minusDirectionalMovement - the value of the Minus Directional Movement indicator corresponding to the last two trading periods. See minusDirectionalMovement for more details.
Returns:: Double value of the Directional Indicator corresponding to the last two trading periods. That is, where the PDM and MDM parameters where both evaluated with respect to the last two trading periods.
See Also:: plusDirectionalMovement - An array representinf the Plus Directional Movement indicators parameter., minusDirectionalMovement - An array representing the Minus Directional Movement indicators parameter.

directionalMotionPeriod

public double[] directionalMotionPeriod(double[] plusDirectionalMovement,
                                        double[] minusDirectionalMovement)

Calculates the Directional Indicator which forms the main part of the Directional Movement System developed by Wellas Wilder. This indicator is generally evaluated using 14 periods and is used with the plusDirectionalMovement and minusDirectionalMovement indicators.

Evaluation

The Directional Movement Indicator can be summarized by the following formula:

Directional Movement Indicator = 100 * ( (PDM - MDM) / (PDM + MDM) ),

Interpretation

Parameters:: plusDirectionalMovement - the value of the Plus Directional Movement indicator corresponding to the last two trading periods. See plusDirectionalMovement for more details.; minusDirectionalMovement - the value of the Minus Directional Movement indicator corresponding to the last two trading periods. See minusDirectionalMovement for more details.
Returns:: Double value of the Directional Indicator corresponding to the last two trading periods. That is, where the PDM and MDM parameters where both evaluated with respect to the last two trading periods.
See Also:: plusDirectionalMovement - In order to evaluate the Plus Directional Movement indicator parameter., minusDirectionalMovement - In order to evaluate the Minus Directional Movement indicator parameter.

dmiSignal

public int dmiSignal(double[] pdi,
                     double[] mdi,
                     int method)
              throws ReferencedServiceException

Evaluates what is know as the Directional Motion Indicator (MDI) Trading Signal. This signal determines whether a given asset or index should be sold, brought or no action should be taken for a given asset under consideration. This trading signal forms the basis of the DMI Trading System which was developed by Welles Wilder.

At its simplest level to DMI system states that when the PDI crosses above the MDI a buy signal is generated and when the MDI crosses above the PMI then a sell signal is generated. This however may generate an excessive number of signals and hence we offer the possibility to smooth out these indicators according to a moving average which will help to reduce to sensitivity of the trading system.

Advantages to this Approach

This trading approach will reveal a trend before it is detected by most market participants. Once the trend becomes more widely recognized other market participants will tend to buy the tend and hence re-enforcing the trend dynamics. Hence the DMI system offers a good risk/reward trend following system.

Parameters:

pdi - an array of the previous values of the positive directional indicator (PDI), where the length of the array is ONE MORE than the number of periods used within the moving average. Where pdi[0] is the latest value of the PDI indicator, pdi[1] is the previous value and so on. Note that the length of the array pdi and mdi, must be identical.

mdi - an array of the previous values of the minus directional indicator (MDI), where the length of the array is one more than the number of periods used within the moving average. Where mdi[0] is the latest value of the MDI indicator, mdi[0] is the previous value and so on. Note that the length of the array pdi and mdi, must be identical.

method - an integer which determines the method used in the evaluation of the moving average in accordance with the following key:

Simple Moving Average
Geometric Moving Average
Linearly Weighted Moving Average
Exponentially Weighted Moving Average with a smoothing weight of 0.5

Returns:

Returns -1, 0, or 1 respectively according to whether a sell, no action or buy signal is generated.

ReferencedServiceException

dmiSignalPeriod

public int[] dmiSignalPeriod(double[] pdi,
                             double[] mdi,
                             int method,
                             int lengthOfMA)
                      throws ReferencedServiceException

Advantages to this Approach

Parameters:

pdi - an array of the previous values of the positive directional indicator (PDI), where the length of the array must be grater than the number of periods used within the moving average. Where pdi[0] is the latest value of the PDI indicator, pdi[1] is the previous value and so on. Note that the length of the array pdi and mdi, must be identical.

method - an integer which determines the method used in the evaluation of the moving average in accordance with the following key:

Simple Moving Average
Geometric Moving Average
Linearly Weighted Moving Average
Exponentially Weighted Moving Average with a smoothing weight of 0.5

lengthOfMA - The number of periods over which the moving average is calculated.

Returns:

Returns -1, 0, or 1 respectively according to whether a sell, no action or buy signal is generated.

ReferencedServiceException

wilderAverageDirectionalMotion

public double wilderAverageDirectionalMotion(double todaysHigh,
                                             double todaysLow,
                                             double yesterdaysHigh,
                                             double yesterdaysLow,
                                             double yesterdaysClose,
                                             double nDaysHigh,
                                             double nDaysLow,
                                             double yesterdaysNDaysHigh,
                                             double yesterdaysNDaysLow,
                                             double yesterdaysNDaysClose)

Evaluates the Average Directional Movement Index Rating (ADXR), which is a component of the Directional Movement System developed by Welles Wilder. The ADXR should be considered as a special type of moving average (WilderMA) or or equivalently as a filter which can be applied to the Directional Indicator.

Originally Welles Wilder used the ADXR indicator to determine whether a trend was sufficiently strong enough in order to apply a trend following system. The rule was to only apply a trend following system when the ADXR was between 20 and 25. The ADXR can also be used within a system which uses the Directional Movement Indicator (for example Welles, Directional Movement System) which will result in trading signals being more infrequently generated.

Evaluation

The ADXR indicator is given by the following formula:

ADXR = ( directionalMotion(today) + directionalMotion(n-days ago) ) / 2

where directionalMotion(today) in the value of the Directional Motion Index (above) today and directionalMotion(n-days ago) is the Directional Motion Index of the asset consideration n-days ago.

Parameters:: todaysHigh - the highest traded value which the asset under consideration takes during todays market action.; todaysLow - the lowest traded value which the asset under consideration takes during todays market action.; yesterdaysHigh - the highest traded value which the asset under consideration takes during yesterdays market action.; yesterdaysLow - the lowest traded value which the asset under consideration takes during yesterdays market action.; yesterdaysClose - the closing price of the asset the preceding day.; nDaysHigh - the highest traded value which the asset under consideration takes during the trading period n-days previously.; nDaysLow - the lowest traded value which the asset under consideration takes during the trading period n-days previously.; yesterdaysNDaysHigh - the highest traded value which the asset under consideration takes during the trading period (n+1)-days previously.; yesterdaysNDaysLow - the lowest traded value which the asset under consideration takes during the trading period (n+1)-days previously.; yesterdaysNDaysClose - the closing price of the asset on the trading period (n+1) days ago.
Returns:: The double value of the Average Directional Movement Index Rating (ADXR) corresponding to the last two trading periods and the n-th, (n+1)-th previous trading periods.
Throws:: IllegalArgumentException - thrown if any of the methods double parameters is not a positive number.

twoDoubles2Array

public double[] twoDoubles2Array(double first,
                                 double second)

Utility method used within client applications in order to write two doubles within an array of length 2.

Parameters:: first - the first double within the array returned.; second - the second double within the array returned.
Returns:: A double array of length two where the 1st element is the first double given as a parameter and the 2nd element is the second double given as a parameter.

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WebCab Technical Analysis
v1.1 (J2SE Edition)

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Constructor Summary
`DirectionalMovementIndicator()` Creates a new instance.

Method Summary
`double`	`averageDailyTrueRange(double[] trueRange)` Evaluates the `x`-day Average Daily True Range (ADTR) of an asset.
`int`	`classifyMovements(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow)` Determines whether todays price action represents an (up or down) trend, (up or down) gap, or an (inner or outer) range.
`double`	`directionalMotion(double plusDirectionalMovement, double minusDirectionalMovement)` Calculates the Directional Indicator which forms the main part of the Directional Movement System developed by Wellas Wilder over a number of periods.
`double`	`directionalMotion(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow, double yesterdaysClose)` Evaluates the Directional Movement Indicator (DMI) which forms the main part of the Directional Movement System developed by Wellas Wilder using only price data.
`double[]`	`directionalMotionPeriod(double[] plusDirectionalMovement, double[] minusDirectionalMovement)` Calculates the Directional Indicator which forms the main part of the Directional Movement System developed by Wellas Wilder.
`int`	`dmiSignal(double[] pdi, double[] mdi, int method)` Evaluates what is know as the Directional Motion Indicator (MDI) Trading Signal.
`int[]`	`dmiSignalPeriod(double[] pdi, double[] mdi, int method, int lengthOfMA)` Evaluates what is know as the Directional Motion Indicator (MDI) Trading Signal.
`double`	`minusDirectionalMovement(double trueRange, double minusDirectionalMovement)` Evaluates the Minus Directional Movement Indicator (DMI) of the Current Bar.
`double`	`minusDirectionalMovement(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow)` Evaluates the Minus Directional Movement (MDM).
`double`	`minusDirectionalMovement(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow, double yesterdaysClose)` Evaluates the Minus Directional Movement Indicator (MDMI) of the Current Bar using price data only.
`double[]`	`minusDirectionalMovementPeriod(double[] high, double[] low, double[] close)` Evaluates the Minus Directional Movement Indicator (MDMI) over a number of periods using price data only.
`double`	`plusDirectionalMovement(double trueRange, double positiveDirectionalMovement)` Calculates the Plus Directional Movement Indicator (DMI) of the Current Bar.
`double`	`plusDirectionalMovement(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow, double yesterdaysClose)` Evaluates the Plus Directional Movement Indicator (PDMI) of the Current Bar using price data only.
`double[]`	`plusDirectionalMovementPeriod(double[] high, double[] low, double[] close)` Evaluates the Plus Directional Movement Indicator (PDMI) over a number of periods using price data only.
`double`	`positiveDirectionalMovement(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow)` Evaluates the Positive Directional Movement (PDM).
`double`	`trueRange(double high, double low, double previousClose)` Finds the True Range (TR) for a given traded asset over a given period.
`double[]`	`trueRangePeriod(double[] highs, double[] lows, double[] closing)` True Range (TR) of a traded asset over a number of periods.
`double[]`	`twoDoubles2Array(double first, double second)` Utility method used within client applications in order to write two doubles within an array of length 2.
`double`	`wilderAverageDirectionalMotion(double todaysHigh, double todaysLow, double yesterdaysHigh, double yesterdaysLow, double yesterdaysClose, double nDaysHigh, double nDaysLow, double yesterdaysNDaysHigh, double yesterdaysNDaysLow, double yesterdaysNDaysClose)` Evaluates the Average Directional Movement Index Rating (ADXR), which is a component of the Directional Movement System developed by Welles Wilder.

webcab.lib.finance.trading.indicators Class DirectionalMovementIndicator

One Period and Multi Period Versions

DirectionalMovementIndicator

classifyMovements

Trends, Gaps and Ranges

positiveDirectionalMovement

minusDirectionalMovement

trueRange

trueRangePeriod

averageDailyTrueRange

plusDirectionalMovement

minusDirectionalMovement

plusDirectionalMovement

plusDirectionalMovementPeriod

minusDirectionalMovement

minusDirectionalMovementPeriod

directionalMotion

Evaluation

Interpretation

directionalMotion

Evaluation

Interpretation

directionalMotionPeriod

Evaluation

Interpretation

dmiSignal

Advantages to this Approach

dmiSignalPeriod

Advantages to this Approach

wilderAverageDirectionalMotion

Evaluation

twoDoubles2Array

webcab.lib.finance.trading.indicators
Class DirectionalMovementIndicator