The DMI Stochastic Extreme is a technical indicator that applies stochastic calculation algorithm to values of DMI Oscillator. We use this in conjuction with the PolarizedFractalEfficiency (PFE) indicator.
Two values are found on the specified period: hh and ll, the former being the highest DMI Oscillator value and the latter being the lowest. The Stoch plot is calculated as the percent ratio between two sums: sum of (osc – ll) values and that of (hh – ll) values, both sums found on the “sum length” period. DMI Stochastic Extreme study finds crossovers of the Stoch plot with Overbought and Oversold levels and marks them with arrows.
According to Barbara Star’s article “The DMI Stochastic”, not each arrow should be interpreted as a Buy or Sell signal; the author suggests using them along with DMI Oscillator instead. When the DMI Oscillator is positive, up arrows might suggest a Buy signal; when the DMI oscillator is negative, down arrow might be considered a Sell signal.
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