This indicator is a component of the Average Directional Index that traders use to measure the presence of an uptrend. PDI is nearly always plotted alongside the Negative Directional Indicator. When the PDI line slopes upward on the graph, it is a signal that the uptrend is getting stronger.
In This Article
What is the Positive Directional Indicator?
How To Analyze Chart Using a Positive Directional Indicator
Category
Trend
Type
Leading
What is Positive Directional Indicator (PDI)?
The Positive Directional Indicator is a part of the directional movement indicators. It measures the presence of an uptrend and is generally plotted alongside the Negative Directional Indicator to show a price trend movement. Both these lines are indicators of the ADX, a smoothed average of both directional indicators, plotted along with the directional indicators. Traders use all the elements in the ADX system to make better trading decisions.
How To Analyze Chart Using a Positive Directional Indicator
The PDI line is plotted along with the Negative Directional Indicator (NDI). When the prior is above the latter, it indicates a bullish trend. It can also show that downward movement is outpacing upward movement.
Conversely, if the NDI line is above the PDI line, it indicates a bearish trend. It can also show that upward price movement is outpacing downward trend movement. The standard setting for the directional indicators is 14 days.
Traders use a crossover between these lines as signals. If the NDI line crosses above the PDI line, it signals a downtrend in price. Thus, it is a short trade or sells cue. Conversely, if the PDI line crosses above the NDI line, it is a buy signal.
The ADX line, a smoothed average between the NDI and PDI lines, helps traders understand how strong the current trend is. An ADX reading of above 20 is indicative of a strong trend.