Double Exponential Moving Average (DEMA) Indicator

 

#trendfollowing #movingaverage #lowlag 

Creator : Patrick Mulloy

Period: 10

For the DEMA indicator, a single line is plotted on the chart.

The Double Exponential Moving Average (DEMA) indicator is a combination of smoothed Exponential Moving Averages (EMAs) and a Basic Exponential Moving Average (EMA). This combination shows smooth and clear trends.

Smoothed exponential moving average is represented by the single line on the chart.

A price above the DEMA is considered bullish, whereas a price below the DEMA is considered bearish.

Useful readings: 

Price above rising DEMA: Uptrend in progress 

Price below falling DEMA: Downtrend in progress 

Price crosses DEMA: Earlier signal than EMA cross, but more false signals in chop 

DEMA flattening: Trend pausing 

Fast DEMA crosses slow DEMA: Trend change signal with less delay than normal MAs 

In choppy markets its speed becomes a weakness, use a chop filter 

Objective rules: 

Bullish: Price closes above DEMA and DEMA is rising. 

Bearish: Price closes below DEMA and DEMA is falling. 

Crossover system: Buy when 20 DEMA crosses above 50 DEMA, sell when it crosses below 

Chop filter: Skip signals if price crossed DEMA more than twice in last 10 bars 

What makes it unique: 

It was the first popular average to mathematically subtract its own lag rather than just shorten the period. Faster response without the noise of a shorter lookback.

The indicator table value in TradePoint & RZone also provides you with a list of all values of this indicator for any group of stocks. This will allow you to compare the readings of this indicator across different stocks.

This indicator is also available in the System Builder on RZone & TradePoint for all charting methods. Using the system builder, you can develop various strategies based on the different conditions already present in this indicator. Additionally, it can be used with other indicators or price patterns to develop effective trading strategies. For any group of stocks and market segments, you can scan and backtest stocks based on those strategies.

Default Period: 10

Default Period: 100

The indicator is applicable to all types of charting. It is calculated based on the number of columns on P&F charts, bricks on Renko charts, lines on Line-break charts, candles on Heikin-Ashi charts, and lines on Kagi charts. While the formula and reading of the indicators remain the same, they become more dynamic on these charts.