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DeMark Indicator 

 

DeMark Indicator Purpose


DeMarker, or “DeM” technical indicator was introduced by Tom DeMark as a tool to make out upcoming buying and selling opportunities. It reveals the price reduction phases which usually correspond with the price highs and bottoms. It is an attempt to evaluate the exact for the basic currency pair. Traders use DeMark tool to determine overbought and oversold conditions, evaluates risk levels, and time when price exhaustion is necessary.



DeMarker Indicator Usage


DeMark is classified as an “oscillator” type since the resulting arch 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.

The differences expected for N periods are then summarized. The received importance is used as the numerator of the DeMark and will be separated by the same value plus the amount of differences between the price minimal of the previous and the current periods (bars). If the current price minima is greater than that of the previous bar, the naught value will be registered. 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.




DeMark Indicator Calculation


DeMark indicator is the sum of all price increase values recorded during the N period divided by the price minima:

  • 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(i) = SMA(DeMax, N)/(SMA(DeMax, N)+SMA(DeMin, N))

Where:


SMA - Simple Moving Average;
N - the number of periods used in the calculation.

 

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