What is DeMarker indicator, the instructions of DeMarker and how to use the DeMarker indicator, the calculation of DeMarker indicator and the DeMarker indicator main parameters
The DeMarker, or “DeM”, indicator is another member of the “Oscillator” family of technical indicators. Tom Demarker created the DeM in an attempt to measure the demand for the underlying currency pair. The DeM indicator relates recent price action to recently closed prices. Traders use the index to determine overbought and oversold conditions, assess risk levels, and time when price exhaustion is imminent.
The DeMarker is classified as an “oscillator” since the resulting curve fluctuates between values of zero and “1”, although some variants of the indicator have a “100” and “-100” scale. The indicator typically has lines drawn at both the “0.30” and “0.70” values as warning signals. Values exceeding either boundary are deemed more risky, while values within are considered low risk. Overbought and oversold conditions are imminent when the curve crosses over these boundary lines, respectively.
Demarker Technical Indicator is based on the comparison of the period maximum with the previous period maximum. If the current period (bar) maximum is higher, the respective difference between the two will be registered. If the current maximum is lower or equaling the maximum of the previous period, the naught value will be registered. The differences received for N periods are then summarized. The received value is used as the numerator of the DeMarker and will be divided by the same value plus the sum of differences between the price minima of the previous and the current periods (bars). If the current price minimum is greater than that of the previous bar, the naught value will be registered.
The value of the DeMarker for the "i" interval is calculated as follows:
The DeMax(i) is calculated:
If high(i) > high(i-1) , then DeMax(i) = high(i)-high(i-1), otherwise DeMax(i) = 0
The DeMin(i) is calculated:
If low(i) < low(i-1), then DeMin(i) = low(i-1)-low(i), otherwise DeMin(i) = 0
The value of the DeMarker is calculated as:
DMark(N) = SMA(DeMax, N)/(SMA(DeMax, N)+SMA(DeMin, N))
- SMA — Simple Moving Average;
- N — the number of periods used in the calculation.
When the indicator falls below 30, the bullish price reversal should be expected. When the indicator rises above 70, the bearish price reversal should be expected.
If you use periods of longer duration, when calculating the indicator, you’ll be able to catch the long term market tendency. Indicators based on short periods let you enter the market at the point of the least risk and plan the time of transaction so that it falls in with the major trend.
- Period: Averaging period for calculation, default is 14