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The Oscillator LE (Long Entry) and KST DMI Oscillator SE (Short Entry) are momentum-following strategies that automate trades based on the relationship between bullish and bearish pressure. They utilize the DMI Oscillator, which is the difference between the +DI (Positive Directional Indicator) and -DI (Negative Directional Indicator).
Core Execution Logic
Both strategies track the oscillator’s value as it crosses a specific, user-defined threshold (the TriggerLevel).
1. DMI Oscillator LE (Long Entry)
- The Condition: It monitors when the DMI Oscillator crosses above the TriggerLevel.
- The Signal: A Buy Market order is generated.
- The Goal: To enter a long position as bullish momentum (+DI) begins to significantly outweigh bearish momentum (-DI).
2. DMI Oscillator SE (Short Entry)
- The Condition: It monitors when the DMI Oscillator crosses below the TriggerLevel.
- The Signal: A Sell Short Market order is generated.
- The Goal: To enter a short position as bearish momentum (-DI) overcomes bullish momentum (+DI).
Key Strategy Inputs
Traders can adjust these parameters to change how “fast” or “slow” the strategy reacts:
- Length (Default: 10): The number of bars used to calculate the DMI components. A shorter length makes the strategy more sensitive to recent price spikes, while a longer length (like 14 or 20) provides a smoother trend signal.
- TriggerLevel (Default: 0): The threshold for entry.
- At 0: The strategy triggers the moment the lead changes (e.g., +DI becomes greater than -DI).
- Above or Below 0: Setting a higher (for LE) or lower (for SE) level requires the trend to show more “strength” or “conviction” before a trade is placed.
Strategic Considerations
- Trend Identification: These strategies are designed for markets with clear direction. In a “choppy” or sideways market, the oscillator may cross the zero line frequently, leading to multiple small losses (whipsaws).
- Execution Timing: Like most built-in TradeStation strategies, the order is typically sent for the open of the next bar immediately following the crossover.
- Filtering with ADX: Many traders pair these with the ADX (Average Directional Index) to ensure they only take DMI Oscillator trades when the overall trend strength is high (usually an ADX above 20 or 25).
