DeMarker Indicator (DeM), How To Use
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DeMarker
The DeMarker indicator is an oscillator designed by Tom Demarker which attempts to identify new buying and selling opportunities. The DeMarker Indicator is similar to the Directional Movement Indicators developed by Welles Wilder.
Demarker produced his indicator to try an overcome the problems associated with other technical tools used in the market to identify overbought and oversold trading conditions of a stock or commodity.
The DeMarker indicator tracks the market sentiment of a stock or commodity by comparing the asset’s present price to that of the previous period. The main concept behind the DI is that it can be used to detect changing market interest in a stock and by doing so identify market tops and bottoms.
The DeMarker indicator oscillates with a range between -100 to 100 and makes no attempt to filter its raw data.
The DI is useful in identifying trade exit and entry points.
There are, in fact, two variants of the DeMarker indicator with one operating between -100 and 100 whilst the second has a range between 0 and 1. Both operate using the same formula.
With the 0 to 1 DeMarker indicator, values recorded above 0.7 are highly indicative that a bear reversal or retraction is imminent whereas readings of 0.3 and below indicate that price is due to turn upwards. The range between 0.3 and 0.7 suggest a flat-lining market.
Consequently, this information can be used to identify easily and accurately good entry and exit points for buying and selling opportunities.
The DeMarker Indicator has developed a very good reputation for being able to accurately and consistently detect new trading opportunities for almost all types of trading markets.
The DeMarker indicator also possesses the ability to distinguish between breakouts and fakeouts very well enabling it to identify new trading channels much better than its rivals. In particular, the DI has developed an impressive track record in detecting true price reversals. The DI is not only capable of producing these types of recommendations on the longer time frames of daily to above, but it can also do so during intra-day trading.
Furthermore, the DeMarker indicator is particularly good at identifying when current trends are reaching their end as well as recommending good entry and exit points on a daily basis.
In simplistic terms, the DeMarker Indicator is calculated by determining the difference between the current price bar and that of the previous bar. If the result is higher, then this value is recorded. Otherwise, if the current value is lower or equal then a zero is registered. The sum of all these values over a selected time period is then divided by the price minima.
Demark’s research concluded that an indicator designed in such a way could anticipate major price events such as reversals, bottoms and tops in contrast to many other tools that are just followers.
The reliability of the Demarker Indicator has tempted many traders to solely use it to help them identify major trading decisions such as selecting optimum entry and exit points.