Directional Trend Index (DTI)

Parameters: r_period = 14 (10–30) • s_period = 10 (5–20) • u_period = 5 (3–10)

Overview

The Directional Trend Index (DTI) was developed by William Blau and described in his 1995 book "Momentum, Direction, and Divergence". Blau, an electrical engineer turned trader, enhanced Welles Wilder's Directional Movement concept by adding a zero line and applying his signature triple smoothing technique to create a more refined momentum indicator. The DTI analyzes composite highs and lows to determine trend direction and strength, oscillating between +100 and -100, where positive values indicate uptrends and negative values show downtrends.

The indicator's calculation is based on High-Low Momentum (HLM) with multiple layers of exponential smoothing: DTI(q,r,s,u) = 100 × EMA(EMA(EMA(HLM(q),r),s),u) / EMA(EMA(EMA(|HLM(q)|,r),s),u). This sophisticated approach filters market noise while maintaining sensitivity to genuine trend changes. A stable uptrend occurs when DTI is positive and rising, while a downtrend is characterized by negative and falling values. The slope of the DTI line reveals momentum strength - steep slopes above zero indicate accelerating uptrends, while flattening slopes suggest waning momentum.

Interpretation & Trading Signals

Primary Trading Signals:

  • Zero Line Crossover: DTI crossing above zero signals trend turning bullish, below signals bearish
  • Positive & Rising: Strong uptrend with increasing momentum - stay long
  • Negative & Falling: Strong downtrend with increasing momentum - stay short
  • Slope Analysis: Steep slopes show strong momentum, flattening indicates exhaustion

Advanced Applications:

  • Overbought/Oversold: Arrows on indicator mark extreme conditions for potential reversals
  • Momentum Divergence: Price making new highs while DTI declining warns of weakness
  • Trend Confirmation: Use DTI > 0 as filter for long trades, DTI < 0 for shorts
  • Strong Markets: In bull markets, buy when DTI crosses zero from red to blue

Performance Characteristics:

  • High Success Rate: Traders report 80%+ win rate when following strong DTI trends
  • Triple Smoothing: Reduces false signals while maintaining trend sensitivity
  • Most Advanced Tool: Analyzes composite highs/lows for complete market picture
  • Momentum Focus: Excels at identifying trends with increasing momentum

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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