Forex Trading Tricks Using DeMarker (1)
This time I want to discuss the tricks of forex trading by using one of the technical indicators called DeMarker, or commonly called “DeM”.You can find this indicator as a default indicator in the MetaTrader4 trading platform.
This technical indicator includes a family of ” oscillators “, designed by Tom Demarker to estimate how high the demand level for a currency pair is. This indicator can also be used to estimate overbought or oversold conditions . In further developments can also be used to estimate risk and target limits.
DeM is included in the “oscillator” family because the physiology forms a curve that fluctuates between zero and 1 (one). Some other variants of this indicator also use numbers between 100 and -100.
In the basic settings, this indicator has a line level at 0.30 and 0.70 as a “warning” area. If the indicator curve is above 0.70 the market is considered to be in overbought condition, otherwise if it is below 0.30 the market is considered to be in an oversold condition.
The appearance of the DeM indicator on the chart is as follows:
DeM only has one curve. Usually this indicator is also combined with the Exponential Moving Average (EMA) indicator to reinforce the signal given by DeM. In this indicator combination setting, DeM functions as a “leading indicator “ which is considered to provide a signal that the market has the potential to change the direction of the trend. Meanwhile, EMA is a “ lagging indicator “ which serves to confirm the signal from DeM.
This indicator is used more to find buy signals than sell, because the buy signal that appears is usually far more valid than the sell signal that appears. If we use DeM on a shorter time-frame it will become more sensitive (giving more signals), but thus also potentially generate more false signals.
In the next article, we will discuss how to use DeMarker in forex trading and how to read the various signals that emerge from this indicator.
See you later.