September 29, 2023

Finance Funds Blog

Defining the Market State and Possible Reversals with DeMarker Indicator RoboForex

5 min read


The indicator assesses the current state of the prices compared to the previous period, helps to define the market state, and find the place of a possible reversal. The DeM chart has the overbought and oversold levels set to the default values of 0.7 and 0.3. As with any technical analysis tool, the DeMarker indicator uses pricing behaviour in the past to forecast future behaviour. It compares the maximum and minimum prices in the current time period with those achieved in the previous period. Based on my own experience, I would add one more condition, the sixth one, to be met for entering a buy or a sell trade. A buy/sell signal is confirmed when the TD Alignment indicator breaks through zero level (red dots) only provided that the indicator hit the overbought/oversold zone before.


Further, if the result obtained, respectively, is greater (or less) than the current values, then it will be taken into account when calculating the totals. Several Thomas DeMark indicators exist, but the DeMarker is the best known of his many creations in the retail forex trading community. MetaTrader4 trading platforms include this indicator, but several very well-known proprietary broker platforms choose to bypass this clever tool. Perhaps, the calculations put too much stress on basic software routines, but if it gains the popularity it deserves, it might be easier to find support for its use. The second set of Green circles represents the exit and new entry points.

Mastering the Art of Trading with DeMarker Indicator on IQ Option

Skill in interpreting and understanding DeM signals must be developed over time. Complementing the DeMarker tool with another indicator is always recommended for further confirmation of potential trend changes. The DeMarker is classified as an oscillator since the resulting curve fluctuates between values of zero and “1”. However, some variants of the indicator have a “100” and a zero scale, as well as “100” versus “-100” on some charts.

Overbought and oversold conditions are likely to be imminent when the curve crosses over these boundary lines. Any information contained in this site’s articles is based on the authors’ personal opinion. These articles shall not be treated as a trading advice or call to action. The authors of the articles or RoboForex company shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein. The algorithm for calculating highs and lows (DeMax and DeMin) is based on comparing the highs/lows of the current period to the highs/lows of the preceding period.

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The buy and sell signals sent by this indicator are interpreted in the same way as those sent by TD DeMarker I and II. Besides, this indicator is also a confirming one, and when it coincides with other signals, it confirms the indicated direction. DeMark suggests that the price action is directly affected by the supply/demand ratio.

Practice sessions will help you see this technical tool’s subtleties and incorporate it into a successful trading strategy. Veteran traders swear by their practice regimens, and you will, too, especially when the DeM works to your benefit. In this example, the “EUR/GBP” currency pair fluctuates wildly over ten days.

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You’re going to learn how to use Demarker as a stand-alone indicator, but also how it performs in combination with other tools. N represents the number of periods used for smoothing.The resulting value of the DeMarker ranges from 0 to 1. Values closer to 0 indicate oversold conditions, while values closer to 1 indicate overbought conditions. The Demarker Indicator is a technical analysis tool developed by Tom Demarker for identifying high-risk buying or selling areas in a given market.

Other indicators in the family are Differential, Channel 1, 2, and 3, Double Point, Camouflage, and Arc among others. Conversely, when the DeM crosses the 70 line from above, it may indicate an imminent downtrend. Traders should consider entering a short sell position in such circumstances. Another well-known indicator worth-studying is the Demarker coming from the famous Tom Demark. In this article, we will build it step by step and see how to use it.

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When the price is growing, the indicator is declining, which signals the trend exhaustion. In early July, the price couldn’t break through the previous high, thus confirming the direction of the indicator (marked with a circle). As an example, I’ll take the BTCUSD market situation that has recently occurred. It is clear from the above chart that the BTCUSD was in the overbought zone (above 60) from the start till the end of May. Afterwards, the price rolled down below 40 and the indicator entered the oversold zone. Make sure you practice on a demo trading account each trading system outlined through this step-by-step Demarker strategy guide before committing any real money.

  • The Demarker technical indicator was developed by Tom Demark, a modern Market Wizard.
  • It resembles the RSI in that it is bounded between 0 and 100 as well as having oversold/overbought values generally set to 0.30 and 0.70 (The RSI’s commonly agreed on levels are 30 and 70).
  • On the other hand, trips above 0.7 and below 0.3 indicate a more trending market.
  • ThinkMarkets ensures high levels of client satisfaction with high client retention and conversion rates.
  • If you increase the averaging parameter, then the indicator DeMarker will display more global price movement, but the trade signals will be late.
  • The algorithm for calculating highs and lows (DeMax and DeMin) is based on comparing the highs/lows of the current period to the highs/lows of the preceding period.

For instance, if the DeM crosses the 30 line from below, it may signal an upcoming uptrend. When the «strong» local extremum is detected, confirmed by the large market volumes, the indicator can generate signals opposite to the current trend, so you need to be careful. The reasonable use of the demarker indicator significantly reduces the risk of any trading strategy. Technical analysis can provide alerts for potential trading opportunities, but previous pricing behaviour is never a guarantee of future results. The Bollinger Bands in “Blue” have been added for additional insights. The bands reflect two standard deviations about a centre line, which is a simple moving average, typically of 20 periods.

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