The DeMarker Indicator is a momentum oscillator that helps forex traders identify overbought and oversold conditions, as well as trend reversals. In this guide, we’ll explore how the DeMarker Indicator works, its advantages, and the best strategies to trade with it effectively.
The DeMarker Indicator (DeM) is a technical momentum oscillator developed by Thomas DeMark to measure demand for an asset and identify potential market tops and bottoms. It compares the current price action to previous price movements to determine if a trend is weakening or strengthening.
The DeMarker Indicator is calculated using the following formula:
DeM = SMA(DeMax) / (SMA(DeMax) + SMA(DeMin))
Where:
Traders use DeMarker levels to spot potential reversals:
Trading Tip: This strategy is most effective in ranging markets, where price oscillates between support and resistance.
Divergence between price and DeMarker can signal potential reversals:
DeMarker can be used to confirm trend strength:
Pairing DeMarker with a moving average (e.g., 50 EMA) can help refine trade signals:
✅ Pros:
❌ Cons:
The DeMarker Indicator is a versatile momentum tool that helps traders spot overbought/oversold conditions, trend reversals, and market momentum shifts. When combined with other technical indicators, DeMarker enhances trade accuracy and decision-making.
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