First, the trading function
1, when the four curves of the DMI index, PDI, MDI, ADX and ADXR, are consolidating in a narrow range around 20, if the PDI curve breaks through the MDI, ADX and ADXR curves one after another, and the stock price also breaks through the medium-and long-term moving average, it means that the bull market is stronger and the stock price will enter a strong pull-up stage in a short time, which is a buying signal sent by the DMI index. As shown in the figure (8–1).
2. When the four curves of PDI, MDI, ADX and ADXR in the DMI index are arranged in a wide range from 20 to 40, if the PDI curve falls below the ADX curve and the ADXR curve successively, investors should pay close attention to whether the market will reverse downward. Once the PDI curve falls below the MDI curve again and the stock price breaks through the medium-and long-term moving average, it means that the main market bears are strong and the stock price will fall in a short time, which is a signal sent by the DMI index. As shown in Figure (8–2).
Second, the function of holding shares and holding money
1. When the PDI curve in the DMI indicator breaks through MDI, ADX and ADXR respectively, it has been running on these three curves, and the stock price has also risen on the basis of the medium and long-term moving average, which means that the bulls still have an advantage in the market and the stock price will rise. This is an obvious shareholding signal of DMI indicator. As long as the PDI curve does not fall below any of these three curves, investors can firmly hold the stocks to be increased. As shown in Figure (8–3).
2. When the PDI curve in the DMI index breaks through MDI, ADX and ADXR respectively, if after a period of high consolidation, the PDI curve falls below the ADX curve but is supported at ADXR, and then turns around again and is supported near the medium-term moving average, it indicates that the market is still strong and the stock price will rise. This is also a signal that DMI index holds shares, and investors can hold shares for a short time. As shown in Figure (8–4).
3. When the PDI curve in the DMI index falls below MDI, ADX and ADXR, if the PDI curve keeps running below these three lines and moves horizontally or downwards in the area below 20, the stock price is also suppressed downwards by the medium and long-term moving average, which means that the short-selling power in the market is absolutely dominant and the stock price will continue to fall, which is an obvious signal of holding money in the DMI index. As long as the PDI curve does not break through any of these three curves, investors should do so. As shown in Figure (8–5).
4. When the PDI curve in the DMI indicator falls below MDI, ADX and ADXR, if the PDI curve has been running below these three lines and the stock price is still suppressed by the medium-and long-term moving average, it means that the short-selling power in the market is still strong and the stock price will fall, which is the signal of holding money in the DMI indicator. As long as the DMI curve does not completely break through these three curves, investors should wait and see.