Dynamic Momentum Index
The dynamic momentum index, developed by Tushar Chande and Stanley Kroll, is used to determine if an asset is overbought or oversold similar to the relative strength index (RSI). The dynamic momentum index reading below 30 is considered as oversold and above 70 as overbought.
Relative Strength (RS) = Average(gain, period) / Average(loss, period)
The lookback period in RSI for RS is 14 but in Dynamic Momentum Index, it range between 3 to 30 depending on the volatility as per below formula.
Std = Standard deviation
Avg = Average
DMI uses fewer periods when the volatility is high and more periods when volatility is low, hence it lags less as compared to RSI.