Stock Screener - US Stocks, Forex and ETFs Please enable JavaScript to view this page content properly  
     
   Article Directory     

Thomas DeMark's Approach - Part IV - Demarker Indicator

How to determine the strength of the trend: The indicator of Demark (Demarker Indicator)

How to determine the strength of the trend: The indicator of Demark (Demarker)

The formula for DeMarker Indicator is:

Calculating DeMax (i).

If HIGH (i) > HIGH (i - 1), DeMax (i) = HIGH (i) - HIGH (i - 1), otherwise DeMax (i) = 0.

Calculating DeMin (i).

If LOW (i) < LOW (i - 1), DeMin (i) = LOW (i - 1) - LOW (i), otherwise DeMin (i) = 0.

Calculating value of the DeMarker - DMark (i):

DMark (i) = SMA (DeMax, N) / (SMA (DeMax, N) + SMA (DeMin, N)).

Where: HIGH (i) - the highest price of the current bar;
LOW (i) - the lowest price of the current bar;
HIGH (i - 1) - the highest price of the previous bar;
LOW (i - 1) - the lowest price the previous bar;
SMA - simple moving average;
N - number of periods used for the calculation.

Thus, the DeMarker Indicator based on the following comparisons: if the maximum of the current bar is higher than the maximum price of the previous bar, then the corresponding difference is recorded. If the maximum price of the current bar is equal to or below the maximum of the previous bar, then register a zero value. Then, the differences obtained for the period are summarized. The resulting number becomes the numerator of the Demark Indicator and divided by the same value plus the sum of the differences between the minimum prices of the previous and the current bars for the period.

The DeMarker Indicator is in the range between 0 and 1. Indicator values between 0.7 and 1 form overbought zone, and between 0 and 0.3 - oversold.

Signals of Demarker Indicator:

  1. Bullish Divergence / Bearish Convergence - the main signal indicating the weakness of the current trend (Fig. 1).
  2. In a flat market exiting overbought (oversold) zone is a signal to sell (buy).

Fig. 1. An example of a DeMarker Indicator bearish convergence.

How to determine the strength of the trend: Overbought / oversold

Thomas Demark singled out two overbought or oversold conditions: extreme and moderate.

Extreme overbought (oversold) occurs when the indicator is in the overbought (oversold) zone more than 5 bars.

Moderate overbought (oversold) occurs when the indicator is in the overbought (oversold) zone less than 5 bars.

If the indicator, fixing the state of the moderate overbought (oversold), came from this area, we expect the bearish (bullish) price reversal.

Exiting the overbought (oversold) zone, after the state of extreme overbought (oversold), as a rule, does not lead to a price reverse. Often, the indicator should come to this area again, fix the state of the moderate overbought (oversold) and a bullish divergence / bearish convergence and leave the area. Only after this trend reversal is possible.

 Return to Previous Page 

Market In&Out - Stock Screener
 
 Backtest
Criterion
Stop Loss, %
  Take Profit, %
 
 
 Trade Alert
Symbol
(e.g. MSFT, EURUSD, SILVER)
Signal
 
 
 Technical Analyzer
Symbol
Display
 
 
 Stock Screener
Criterion
 
 
 Most Popular
Stock Backtest and Stock Screening Strategy Building. Value Stock Screener and Graham Stock Screener for Value Investing Analysis. Dividend Stock Screener for Income Investing.
Technical Stock Charts: Renko Chart, P&F Chart, Technical Stock Chart.
International Stock Screners: OTC Stock Screener, ASX Stock Screener, Canada Stock Screener, UK Stock Screener and India Stock Screener
ETF Stock Screener: ETF Screener, Mutual Fund Screener
Stock Portfolio Tracker: Portfolio Tracker
 
 



Disclaimer - FAQ - Contact Us
Copyright ©2008-2016 Market In&Out. All rights reserved.
Best viewed in