Understanding the DeMarker Indicator: A Trader's Guide

The DeMarker (DeM) indicator is a nifty tool that helps traders gauge market trends by comparing the current period's maximum price to that of the previous period. It’s all about spotting those highs and lows and making informed trading decisions.

Here’s how it works: if the current period's maximum price is higher than the last one, the difference is noted. If it’s lower or equal, it records a value of zero. Over a set number of periods, these values are summed up to create the DeMarker value. This value is then divided by the same sum plus the differences between the previous and current period's minimum prices. If the current minimum price is higher than the previous one, it again records a zero.

When the DeMarker drops below 30, it’s a sign that a bullish reversal might be on the horizon. Conversely, if it climbs above 70, it’s an indication that a bearish reversal could be coming. This makes the DeMarker a valuable indicator for anticipating market movements.

Using longer periods to calculate the DeMarker can help you catch the long-term market trends. On the flip side, shorter periods can allow you to enter the market with less risk and better time your trades to align with the prevailing trend.

Calculation of the DeMarker:

To calculate DeMax(i):
If high(i) > high(i-1), then DeMax(i) = high(i) - high(i-1), otherwise DeMax(i) = 0.
To calculate DeMin(i):
If low(i) < low(i-1), then DeMin(i) = low(i-1) - low(i), otherwise DeMin(i) = 0.
Finally, the DeMarker value is given by:
DMark(i) = SMA(DeMax, N) / (SMA(DeMax, N) + SMA(DeMin, N)).

Where:

SMA — Simple Moving Average;
N — the number of periods used in the calculation.

DeMarker indicator MetaTrader4

If you’re looking for a deeper dive into the DeMarker indicator, check out the full description in the Technical Analysis: DeMarker.

Understanding the DeMarker Indicator: A Trader's Guide

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