Usage
Dip Index Usage
How to use DIPX effectively in trading and analysis, including interpretation, signal usage, strategic applications, and best practices.
DIPX outputs values from 0% to 100%, reflecting how widely participation extends across the underlying assets in an index or basket.
0–20%
Extremely Weak – Very few components are above the MA; broad-based selling pressure. Potential reversal zone.
20–40%
Weak – Majority of assets are underperforming; caution advised.
40–60%
Neutral / Balanced – Participation is evenly split; market in equilibrium. Trend continuation likely.
60–80%
Strong – Most components are above the MA; healthy momentum.
80–100%
Extremely Strong – Nearly all components are outperforming; overextended conditions possible.
1. Assessing Market Health
Use DIPX to evaluate whether price moves are supported by broad participation:
In a bull trend, confirm strength by checking if DIPX stays above 50%.
In a bear trend, watch for rebounds in DIPX to spot temporary relief rallies.
2. Detecting Divergences
Divergence occurs when the price trend and DIPX trend disagree — often a precursor to reversal.
Bearish Divergence
Price makes higher highs; DIPX makes lower highs
Momentum weakening → potential top
Bullish Divergence
Price makes lower lows; DIPX makes higher lows
Selling pressure fading → potential bottom
How to Spot It:
Overlay DIPX on the same chart as the index price.
Use trendlines or horizontal markers to compare swing points.
Focus on weekly or daily timeframes for reliability.
Warning: Divergences can persist — always wait for confirmation (e.g., price breakout or signal marker).
3. Signal-Based Entries/Exits
When enabled (Signals = true), DIPX generates triangle markers when exiting extreme zones:
Bullish Triangle (▲)
DIPX crosses above Oversold Value (e.g., 20%, 30%)
Blue upward triangle
Bearish Triangle (▼)
DIPX crosses below Overbought Value (e.g., 80%, 70%)
Orange downward triangle
These signals represent exits from overextended conditions, not immediate reversals. They highlight moments when sentiment may be shifting.
4. Recommended Settings
Market
Choose relevant benchmark (e.g., SP500, Nasdaq, Russel, etc)
Match to your trading domain
MA Length
200
Long-term trend filter
MA Type
SMA, EMA, RMA, WMA, VWMA
EMA reacts faster; SMA smoother
Oversold Value
20
Adjust based on volatility
Overbought Value
80
Standard for most markets
Mode
Line , Stepline, Stepline Diamond, Circle, Cross
Stepline emphasizes discrete changes
Signals Show
true
Enable visual triggers
OB/OS Zones Show
true
Improve readability
5. Timeframe Guidance
1m – 4h
❌ Not Recommended
DIPX uses daily-aggregated data; intraday noise dominates
Daily (D)
✅ Strongly Recommended
Matches data frequency; clearest signals
Weekly (W)
✅ Acceptable
Ideal for macro analysis and long-term positioning
Monthly (M)
⚠️ Limited Use
Too slow for active trading; useful for big-picture context
By integrating DIPX into your analysis, you gain a powerful lens into market internals — helping you distinguish between broad-based strength and narrow leadership, regardless of asset class.
Whether you trade stocks, futures, forex, or digital assets, DIPX enhances your ability to time entries, manage risk, and understand the true drivers behind price movements.
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