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Trading with the DeMark indicator
The DeM, DeMark or DeMarker indicator
The DeM, DeMark or DeMarker indicator was designed by well-known trader and investor Thomas DeMark. The DeMark indicator is best used to detect divergences. Simply put, if the market is still falling but the DeMark indicator is rising, there is a buy signal for DeMark.
The DeMark indicator explained
The DeMark indicator is an oscillator. An oscillator is a value that fluctuates between 1 and 0. A high value (above 0.7) indicates an overbought situation. A low value (below 0.3) indicates an oversold situation.
This example shows the DeMark indicator below the price chart. The overbought situations are red. The oversold situations are green.
The DeMark indicator can be used as a regular indicator, possibly together with other indicators and filters, to design a trading strategy.
Much more interesting are the DeMark divergences.
Trading with DeMark divergences
Trading based on the DeMark indicator is done by looking for divergences. Divergences are moments when the price chart moves in one direction, and the DeMark indicator in the other.
The NanoTrader platform shows you the divergences you can trade on in the chart. This makes everything simple.
An overbought zone followed by a second, smaller overbought zone in a falling market is a typical DeMark buy signal. An oversold zone followed by a second, smaller oversold zone in a rising market is a typical DeMark short sell signal.
The blue lines in the charts make the divergences immediately clear.
This example shows a buy signal. The stock market is still falling, but the DeMark indicator is already rising, meaning the situation is less 'oversold' and the tide is about to turn. The green vertical line is the buy signal.
This example shows a short sell signal. The stock market is rising, but the DeMark indicator is falling. This means that the stock market is less 'overbought' and is about to fall again. The red, vertical line is the short sell signal.
NanoTrader triggers an alarm when a divergence appears. The platform can also open a position and automatically close it again.
Traders, who do not wish to see the blue divergence lines, can disable them in their charts.
The DeMark indicator in the trading platform
- See the DeMark indicator and DeMark divergences in the chart.
- Place orders automatically when a divergence occurs.
- Set an alarm when a divergence occurs.
- Disable the blue divergence lines in the chart.
- Open the chart of the instrument you wish to trade.
- In the WHS Proposals folder, select the DeMarker indicator in the Indicators section.
- Define the setting in the Designer Dialog window.
- Activate TradeGuard+AutoOrder or AutoOrder for automated trading.