The indicator of Demark
(Demarker)
A technical indicator of Demark called DeMarker (DeMarker) was developed by Thomas R. DeMarco (Thomas R. Demark) and published in the book "Technical Analysis - a new science» (The New Science of Technical Analysis).
The author would like to create an indicator that indicates overbought or oversold market, but at the same time, not having the drawbacks of traditional indicators of the same kind. That would be able to effectively identify minimum and maximum price charts, based on the demand for a given financial instrument and measure the riskiness of entry into this situation. This means that the indicator of Demark identifies the areas of price exhaustion, which usually coincide with the extremes of price charts.
Demarker based on the chart in the shape of the line. The formula for its calculation is shown below. The indicator of Demark is similar to 'signals with other technical indicators of the same species (Stochastic, Percent Range). As the signal is a break through Demarker reference levels (-30 and recommended 70), and divergence.
To capture the longer-term trends, you should use longer periods. Well, the use of smaller periods - allows you to open positions at the lowest risk, in the direction of the main trends of the market.
Calculation
The value of the DeMarker interval i is calculated as follows:
Calculated DeMax (i)
If HIGH (i)> HIGH (i - 1), DeMax (i) = HIGH (i) - HIGH (i - 1)
otherwise DeMax (i) = 0
Calculated DeMin (i)
If LOW (i) <LOW (i - 1), DeMin (i) = LOW (i - 1) - LOW (i),
otherwise DeMin (i) = 0
The value of the DeMarker:
DMark (i) = SMA (DeMax, N) / (SMA (DeMax, N) + SMA (DeMin, N))
Where:
HIGH (i) - the highest price of the current bar;
LOW (i) - the minimum price the current bar;
HIGH (i - 1) - the highest price the previous bar;
LOW (i - 1) - the minimum price the previous bar;
SMA - simple moving average;
N - number of periods used in the calculation.
