DeMarker Indicator (DI)

Ivan Cavric Welland
By:  Ivan Cavric

The DeMarker Indicator (DI) can be used to help you identify new trading opportunities because Tom DeMarker designed the DI with this purpose specifically in mind. The DI exhibits a number of features that have similarities to those of the indicators designed by Welles Wilder. In addition, DeMarker tried to devise solutions for those problems experienced by many other technical indications when dealing with overbought and oversold trading conditions.

The DI was designed to monitor and track the market sentiment of an underlying asset by comparing its current value to that of the preceding time-period. Consequently, you can utilize the DI to evaluate the demand for a particular asset. This action will then aid you in detecting market tops and bottoms.

You will discover that this indicator is particularly helpful in identifying new trading opportunities because it does not filter its raw data. The DI has two variations although both have been constructed using the same formula. One displays readings between -100 to +100 while the other generates values between 0 and 1.

If you utilize the latter you must understand that when the DI produces values higher than 0.7 then this is a strong indication of a bearish price reversal or retraction. Similarly, when the DI posts readings below 0.3 then you should regard such a development as an early warning that a market bottom is forming. Values registered between 0.3 and 0.7 are indications that conditions for range-trading currently exist. Hence, you will find that the DI can assist you to detecting new buying and selling possibilities and that it has acquired a good reputation for doing so under nearly all Trading market conditions.

In addition, the DI is very proficient at differentiating between breakouts and fakeouts and again has secured a very good track record at performing this task. The DI has been constructed so that it is very efficient at identifying real price reversals especially if you utilize trading charts displaying the daily time-frame or higher.   This is because the DI determines the difference between the price of a previous time period and the current one. This value is stored if a positive result is generated otherwise it is set to zero. All the values recorded for a chosen time period are added together and then divided by the lowest stored value.

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Location: Welland, ON, Canada

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