Oscillator Indicator: DeMarker


INDICATOR TYPE

The DeMarker indicator named after Thomas DeMark is a momentum oscillator very similar in nature to the Relative Strength Index (RSI) developed by Welles Wilder.

PURPOSE

By comparing inter-period price maxima and minima the DeMarker indicator attempts to gather information about price movements to help determine the underlying trend strength and identify over-bought/sold trade conditions.

TRADE SIGNALS

  • RANGING MARKETS

  • Go long when the DeMarker falls below 0.3 and rises back above it or where there is a bullish divergence with price where the first trough is below 0.3.

  • Go short when the DeMarker rises above 0.7 and falls back below it or where there is a bearish divergence with price where the first peak is above 0.70.

  • Failure swings (see RSI for example of a failure swing) strengthen other signals.

  • TRENDING MARKETS

  • Go long during an up-trend, when the DeMarker falls below 0.4 and rises back above it and

  • Go short in a down trend when the DeMarker rises above 0.6 and falls back below it.

  • Traders may wish to take profit on divergences or exit using a trend indicator.

  • Traders should avoid selling/buying at overbought/oversold levels in strongly trending markets as subsequent periods of sideways trading can return the oscillator to more normal levels without any material favourable movement in the direction of the trade.


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