The DeMarker Technical Indicator is also known as DeM indicator. You can use this technical indicator to compare the maximum and minimum prices for one period to the maximum and minimum prices for another period. This gives you an idea of the demand that exists. You can also use it to determine underbought and oversold conditions.
Day traders use the DeMarker indicator to figure out when price exhaustion is imminent or to evaluate the amount of risk associated with particular actions. This oscillator should not be used in a market that is ranging. It should only be applied when you observe a clear trend, or the method of technical analysis that works in a trending market will give you misleading results.
When day traders have gained a significant amount of experience, they may start using the DeMarker indicator to find divergences. This is a situation where the price of the commodity is behaving differently for the oscillators. Divergences tend to be rare and experienced traders use several oscillators to confirm the divergence.
This single fluctuating curve tends to be better at picking bottoms than tops. If you adjust the period so that it’s shorter, you’ll notice that the DeMarker indicator will become more sensitive. However, you’re also more likely to get false signals with shorter periods. Usually, professional traders use the DeMarker indicator more often than day traders do. It’s easy to use and can give insight into a wide selection of commodities, including currencies and stocks.
Calculating DeMarker Technical Indicator
In the calculations below, the following symbols are used:
- DMark = DeMarker
- N = the number of periods
- SMA = Simple Moving Average
You’ll have to calculate DeMax and DeMin and then use those values in your formula for DMark.
That is, DeMarker is found as: DMark(i) = SMA(DeMax, N)/(SMA(DeMax, N)+SMA(DeMin, N))
If low(i) < low(i-1), then DeMin(i) = low(i-1)-low(i), otherwise DeMin(i) = 0
DMark(i) = SMA(DeMax, N)/(SMA(DeMax, N)+SMA(DeMin, N))