Dem Indicator & Demark: Indicator Marker In Demarking Strategy

A Dem Indicator is a technical analysis tool that compares the high and low asset prices to the past period’s prices. Learn how to use the strategy

Have you ever heard of the Dem indicator in trading?

Well, it is undoubtedly a great tool for spotting buy or sell opportunities in a diverse market. And you should use the Dem indicator strategy at least once in your trading journey.

In Beirman Capital’s Indicator Introduction Series, today we will discuss the Dem Indicator, how to interpret and trade it, and the pros and cons of the style. So, let’s get started with a small introduction.

What is a Dem Indicator?

A Dem Indicator, popularly known as the DeMarker or DeMark indicator, is a widely used technical analysis tool. It compares the recent maximum and minimum prices to the high and low prices of the past period to provide key insights into the current trend.

The DeMarker Indicator was developed by a trader named Thomas DeMark in 1980 popularly known as tom demark. It assists traders in identifying the current trend, overbought and oversold conditions, and trading divergence that ultimately helps traders in making buy and sell decisions.

It is also known as de marker, demark indicator, or simply demarking. Many traders also refer to it as part of the Demark indicators family, which includes tools like the TD Sequential indicator and the DeMark 13 indicator.

DeMarker Indicator Formula

The formula consists of two components:

Maximum price: High – Previous High or 0
Minimum price: Previous Low – Low or 0

If the difference is negative, it is considered as zero.

DeM Indicator = [High – Previous High] / ([High – Previous High] + [Previous Low – Low]) * 100

This simple yet effective calculation is available through automated platforms. You don’t have to calculate manually since the DEM indicator free download is available across platforms like MT4 and TradingView.

Demark Indicator Trading Strategies

The Dem Indicator MT4 oscillates between 0 and 1. Some versions range from -100 to +100 depending on your Dem indicator settings, but the core strategy remains consistent.

Buy and Sell Interpretation:

When the DeM price oscillates near 0.70, the level suggests strong bullishness, indicating that traders should open a buy position. When the DeM price oscillates near the 0.30 level, it suggests strong bearishness, indicating that traders should open a sell position.

Overbought and Oversold Conditions:

When the DeM price breaks above 0.70, the level suggests overbought conditions, indicating traders to open a short position expecting a reversal. Meanwhile, when the DeM price breaks below 0.30, the level suggests oversold conditions, indicating that traders should open a buy position.

Divergence:

When the asset price makes a lower low, and the Dem indicator makes a higher low, it results in bullish divergence, suggesting a bullish reversal, indicating traders to open a buy position. When the asset price makes a higher high, and the Dem indicator makes a lower high, it results in bearish divergence, suggesting a bearish reversal, indicating traders open a short position.

How to Use the DeMarker Indicator Strategy

While “DEMA” typically refers to Double Exponential Moving Average, it’s often confused with the DeMarker. Both serve distinct purposes. The DeMarker indicator functions as a momentum oscillator, and is best used in combination with other indicators to validate signals.

The best setting for DeMarker is generally a period of 13, commonly known as the DeMark 13 indicator. However, you can customize this based on your strategy.

Select an Asset:

The first thing you need to do is identify the trading instrument you want to trade, like you want to trade in a currency pair, commodity product, stock, or any other financial asset.

Select the time frame and Plot the Indicator:

Choose the asset chart, select the time frame, and plot the Dem indicator MT4 or MT5. Also, you can use the DeMark 13 indicator, which has a time period of 13, and most traders use it.

Use Alternative Indicator:

With the Demarker Indicator, you need to use another indicator as well to confirm its findings. You can use Fibonacci retracement, Relative Strength Index, and Bollinger Bands to confirm the indicator interpretation.

Place the Trades:

Based on the DEM indicator strategies discussed above, determine the trade opportunities and place a trade. You can consider opening a short position if the DEM line oscillates above 0.70. While you can consider opening a long position if the DEM line oscillates below 0.30. Also, set proper stop loss and take profit to deal with the unexpected market turn.

Pros of the DEM Indicator

Free Access: You can find the Dem indicator for free on different platforms. So basically, using the comprehensive tool does not cost a single penny.

Compatible Indicator: The Dem indicator is compatible with many other indicators. It means you can pair it against diverse indicators for confirmation.

Comprehensive: The Demarker indicator provides you with comprehensive information. It includes trend continuation or reversal, overbought and oversold conditions, and the possibility of divergence.

Simplicity: Interpreting the Demark indicator is quite simple and similar to the widely used Relative Strength Index. So, if you have ever used the RSI, using the Dem Indicator has become easy for you.

Cons of the DEM Indicator

Subjectivity: Like any other technical analysis indicator, the Demark indicator is subject to different interpretations. Two traders can make different interpretations by seeing the same chart, using the same indicator and time frame.

False Signals: The DEM Indicator is not foolproof. In highly volatile and choosy market conditions, it can generate false signals.

Wrapping Up

The DeMarker indicator is a robust and versatile tool suitable for all trading instruments be it forex, stocks, or indices. Whether you’re a short-term or long-term trader, this forex risk management and momentum indicator helps in decision-making with its easy-to-read signals.

Pair it with other tools for best results and reduce false signals. Test your strategy on a demo account before going live.

Ready to try the DEM trading strategy? Open a demo account with Beirman Capital today and start building your edge in the market.

FAQ

What is the most powerful MT4 indicator?

The most powerful indicators on MT4 are RSI, Bollinger Bands, Fibonacci Retracement, and EMA indicator. Each excels under different market conditions.

What is the DeM indicator?

It’s a momentum oscillator developed by Tom Demark to spot overbought, oversold, and divergence signals using recent highs and lows.

What is the best leading indicator in MT4?

The best leading indicators include DeMarker, Stochastic Oscillator, and MACD for early trend identification.

Does MT4 have an EMA indicator?

Yes, MT4 does have an EMA indicator (Exponential Moving Average). It can be accessed via the platform’s built-in indicators list.

What is the most accurate indicator in forex?

There is no single most accurate one, but RSI, MACD, Bollinger Bands, and DeMarker are among the most effective.

What is the most successful trading indicator?

The most successful indicators depend on trading style, but DeMarker, Fibonacci, RSI, and EMA have a high success rate when combined properly.

What is dem value?

The dem value is the oscillator reading of the DeMarker indicator, typically between 0 and 1, indicating market strength or weakness.

What is the best setting for DeMarker?

The default setting is 13 periods, which suits most market conditions. For fast markets, lower settings (e.g., 8) can be tested.