How to Use Technical Indicators
Understanding Average Dynamic Trend Model
What is ADTM?
Average Dynamic Trend Model, or ADTM, is a technical indicator that measures market sentiment by comparing the magnitude of opening price movements. It assesses the difference between the upward and downward fluctuations from the previous day's opening price.
How is it calculated?
DTM (Dynamic Trading Measure) Calculation:
If today's opening price ≤ yesterday's opening price, then DTM = 0.
If today's opening price > yesterday's opening price, then DTM = max((today's highest price - today's opening price), (today's opening price - yesterday's opening price)).
DBM (Dynamic Bottom Measure) Calculation:
If today's opening price ≥ yesterday's opening price, then DBM = 0.
If today's opening price < yesterday's opening price, then DBM = max((today's opening price - today's lowest price), (today's opening price - yesterday's opening price)).
DTM and DBM
STM (Summed Trading Measure) = Sum of DTM over the past 'n' days.
SBM (Summed Bottom Measure) = Sum of DBM over the past 'n' days.
DTM and DBM reflect the market's buying and selling pressure, respectively.
ADTM Calculation:
If STM > SBM, then ADTM = (STM - SBM) / STM.
If STM < SBM, then ADTM = (STM - SBM) / SBM.
If STM = SBM, then ADTM = 0.
ADTMMA (ADTM Moving Average) Calculation:
ADTMMA = 'm'-day simple moving average of ADTM.
Parameter Settings:
Set 'n' (the summation period) to 23 days.
Set 'm' (the moving average period) to 8 days.
How is it applied?
The ADTM oscillates within the range of +1 to -1.
A potential upward trend is indicated when ADTM crosses above the ADTMMA, and a potential downward trend is suggested when ADTM falls below the ADTMMA.
Note: This indicator should be used in conjunction with other indicators for a more comprehensive assistance in trading decisions.