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DeMarker

DeMarker

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Published by Boris Fesenko

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Published by: Boris Fesenko on Mar 29, 2012
Copyright:Attribution Non-commercial

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05/20/2014

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The DeMarker Indicator
The DeMarker Indicator is one of the oscillators of the technical tools. It was created by Tom DeMarker as he wanted to evaluate the demand for an underlying pair of currencies. TheDeMarker indicator associates the recently closed prices with the most recent action of theprice. Dealers will look to this indicator when they want to understand what are theoversold and overbought conditions, the levels of risk and work out at what point the priceexhaustion is about to happen. DeMarker can be called an
“oscillator”
because its curve willmove between 1 and zero. There are some different versions of the indicator that use a
‘100’ and ‘
-
100’ range.
This DeMarker indicator will normally consist of some lines that areplaced at the
“0.30”
 
and “0.70”
points as warning signs. Any amounts that cross either of the markers are viewed as riskier and those inside the markers are less risky. Oversold andoverbought situations are close by at the point the lines are crossed by the curve.
The formula for DeMarker
 
It’s common to find DeMarker
on MT4 and it is made up of the following sequence:1.
 
Pick a time frame
“X” (
Common is
“14”,
but
“8” or “9”
are more sensitive);2.
 
Work out the DeMax = High
 –
Previous High if >0, otherwise DeMax = 0;3.
 
Work out DeMin = Previous Low
 –
Low if >0, otherwise DeMin = 0;4.
 
DeM = MA of DeMax/(MA of DeMax + MA of DeMin).There are programs that will produce aDeMarker indicator and you will see DeMarker indicator as a curve that fluctuates. Dealers may sometimes put in an exponential movingaverage as well so as to boost the dealing signals. A DeMarker is seen as a
“leading”
indicator, as the signs alert that there will soon be a change in any trend. Its downside isthat the timing of DeMarker is poor which is why a lagging indicator is often added.DeMarkers will identify the big lows better than the big highs. Smaller timeframes will
increase the indicator’s sensitivity but also the volatility and likelihood of increased drop
signs. As previously mentioned, the DeMarker values that are under 0.30 or above the 0.70level should be looked at. However, the main areas to pay attention to will be the top and
bottom points and even more importantly once they are nearing the zero or ‘1’.
 This DeMarker oscillation will be more effective over longer periods such as daily ones butthey can also be applied to the shorter ones as well. There are no guarantees that anytechnical indicator will be right on every single occasion and this rule applies just as much tothe DeMarker indicator. There are always going to be occasions when the wrong signals aregiven but even so the consistency of the positive signals are sufficient that overall the forexdealer should be at an advantage. It will take time to develop the skill and technique neededto fully understand the signals provided by the DeMarker indicator.And it is always best to use the DeMarker indicator with a subsequent tool that works well with it so as to reinforce any possible trend changing signals.
It’s important to note that

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