Dynamic Momentum Index (DMI)

Dynamic momentum index is a momentum indicator that measures how far from the equilibrium level a share price is. Dynamic momentum index depends on the volatility of the share price.

Dynamic momentum index is more sensitive to stock price changes when there is high volatility compared to when there is low volatility. Dynamic momentum index is quite similar to the relative strength index with the only difference that the dynamic momentum index is dynamic when it comes to the volatility. The dynamic momentum index may include between 5 to 30 days in the computation of RSI, how many days that are taken into account depends on the volatility.

Dynamic momentum index can have values between 0 and 100. A buy signal is triggered when the dynamic momentum index rises over 30 from a lower level and a sell signal is triggered when the dynamic momentum index drops below 70 from a higher level.