Everything should be made as simple as possible, but not simpler.
—Attributed to Albert Einstein
The direction of momentum (DOM) integrates price change with positive feedback, and in the process reveals the trend, what Livermore called “the line of least resistance.” Though smoother than underlying price activity, DOM can occasionally become noisy, so to smooth the data further, I employ moving averages. In Figure 10.1 an exponential moving average (EMA) irons out a particularly ragged DOM series from 2007. In this case, DOM is calculated for the average group.