I use a 1 minute chart and a 2 minute chart on the stock
(obviously both have the DMI on them) and a 2 minute Nasdaq futures chart.
The 1 minute chart generally makes the call and the 2 minute confirms it.
I use a smooth period of 15.
I'm telling you DMI works way better than MACD and Stochastics in my experience. The DMI works on all levels of chart: 1 minute, 5 minute, 1 day, 1 month etc... When you look at the buy/sell call and the stock price it consistently works. I don't know why more people haven't been discussing this.
There is no price correlation necessary IMO. What you need
to see is ADX (white line) break above the middle line (MDI or PDI) and
whichever line is on the bottom MDI (green) and PDI (red) determines the call.
I set them up like MDI (green) and PDI (red) because it makes sense in my mind.
Green = Buy
Red = Sell
It doesn't get any easier than that. Don't just take my word for it, look at a software that lets you combine DMI/ADX onto one study and back test it. Look at when DMI makes the call and what the stock did. The percentage of times that it makes the correct call is astonishing.
I ONLY enter a trade when ADX (white line) is on the top. I
never trade when ADX is at the bottom or between the PDI/MDI lines. In my
experience the only correlations that work are when ADX is at the top, then you
just need to see which (MDI/PDI) is at the bottom to determine the call.
It is best to enter just as ADX is crossing the other lines and heading up. Once it is already at the top it doesn't work as well, especially on the "scalp" type trades of .02-.04. The "scalp" move generally happens quickly once ADX crosses to the upside.