Thomas DeMark's Approach, Part IV: The DeMarker Indicator

The DeMarker indicator is Thomas DeMark’s oscillator for measuring the strength of a trend. Instead of comparing closes, as RSI does, it compares each bar’s high and low with the previous bar’s. The idea is simple: in a strong uptrend, highs keep rising; in a strong downtrend, lows keep falling. When that stops, the trend is losing steam.

How DeMarker is calculated

For each bar i, first measure how far the high rose and the low fell compared with the previous bar:

DeMax(i) = High(i) - High(i-1)   if High(i) > High(i-1), otherwise 0
DeMin(i) = Low(i-1) - Low(i)     if Low(i) < Low(i-1),   otherwise 0

Then smooth both with a simple moving average over N bars and compare them:

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

A common choice for N is 14. The result always lies between 0 and 1:

• Close to 1: highs have been rising much more than lows have been falling. Buyers are in control.
• Close to 0: lows have been falling much more than highs have been rising. Sellers are in control.
• Around 0.5: neither side dominates.

Overbought and oversold zones

Readings between 0.7 and 1 form the overbought zone, and readings between 0 and 0.3 the oversold zone. DeMark split these conditions into two kinds by how long the indicator stays in the zone:

The distinction matters. A long stay in the overbought zone is a sign of strength, not a sell signal.

Signals

• Divergence. The main signal. If price makes a new low but DeMarker makes a higher low (bullish divergence), or price makes a new high but DeMarker makes a lower high (bearish divergence), the current trend is weakening (Fig. 1).
• Leaving a zone in a sideways market. When the market is moving sideways, the indicator leaving the overbought zone is a sell signal, and leaving the oversold zone a buy signal.

Fig. 1. A bullish divergence between price and the DeMarker indicator.

DeMarker works best as a filter for other signals, such as a qualified TD-line breakout (Part II), rather than as a trading system on its own. For a complete mechanical system, see DeMark’s Sequential in Part V.

Part 4 of 5 in the Thomas DeMark’s Approach series. Previous: Part III: Price Projections. Next: Part V: TD Sequential.

Screen for it on MarketInOut

Our formula language includes DeMark TD-Line breakouts, with the qualifiers from Part II. For example, NYSE and Nasdaq stocks that just broke above a level 1 TD-Line:

exch(nyse,nasdaq) and type(stock) and td_ubm1

Rewritten in October 2026 from an article in MarketInOut’s original article library.