Trading Indicator Toolboox – Learn to Use DeMarker

DeMarker Trading Indicator

The original Analysis Toolbox articles discussed the various market cycles including trends and continuations. This part of the The Trader’s Indicator Series focuses on the Trading Indicator Toolbox, as we will discuss various indicators that are found on most trading platforms. We will discuss the indicator in the context of the chosen market, and if it resonates with you, please continue to do your own analysis with it. Trading successfully is all about feeling comfortable with a methodology and using that system repeatedly even when boredom sets in. I will be discussing indicators in alphabetical order that can be found on the MotiveWave platform. (for a free 2-week trial CLICK HERE)

The DeMarker indicator compares the most recent price action to the previous period’s price in an attempt to measure the demand of the underlying asset. Generally used to identify price exhaustion and market tops/ bottoms.

DeMarker Trading Indicator

INTRODUCTION

The DeMarker trading indicator is a momentum oscillator, similar to the RSI and many others available today. The DeMarker scale is between 0 and 100, typically measuring overbought above 70 and oversold below 30. In this article, we will explain how to use this indicator during trends and sideways markets.

DeMarker measures the demand for the market by comparing recent price action to previously closed price to gauge the underlying trend strength. As with the RSI, it is less prone to distortions, and presents as a fairly smoothed curve below price.

DeMarker Calculation for time “t”:

DeMax(t) = High(t) – High(t-1) if High(t) > High(t-1); if not, DeMax(t)=0

DeMin(t) = Low(t-1) – Low(t) if Low(t) < Low(t-1); if not, DeMin(t)=0

DeMarker(t) = SMA (DeMax, N)/ (SMA (DeMax, N) + SMA (DeMin, N)), where

High(t) = highest price of current period

Low(t) = lowest price of current period

High(t-1) = highest price of previous period

Low(t-1) = lowest price of previous period

N = number of periods (14 is standard in the calculation)

Using shorter time spans than 14 periods will create greater volatility and establish more overbought and oversold conditions. Longer time periods will produce fewer signals.

image of DeMarker trading indicator used on usdjpy chart

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Jody
Jody Samuels, a former institutional trader for a US Investment Bank, and author of The Trader’s Pendulum, The 10 Habits of Highly Successful Traders, founded FX Trader’s EDGE in 2006. A premiere, global online Trading and Coaching School, FX Trader’s EDGE is home to the Forex Foundation and Elliott Wave Ultimate, progressive educational training programs to assist traders of all levels in the markets. FX Trader’s EDGE offers individual and institutional clients proprietary tools, services and education to trade Forex, CFD’s and Stocks online. One-on-one coaching is also available.
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Jody

Jody

Jody Samuels, a former institutional trader for a US Investment Bank, and author of The Trader’s Pendulum, The 10 Habits of Highly Successful Traders, founded FX Trader’s EDGE in 2006. A premiere, global online Trading and Coaching School, FX Trader’s EDGE is home to the Forex Foundation and Elliott Wave Ultimate, progressive educational training programs to assist traders of all levels in the markets. FX Trader’s EDGE offers individual and institutional clients proprietary tools, services and education to trade Forex, CFD’s and Stocks online. One-on-one coaching is also available.

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