How to Use DeMarker Indicator For Forex Trading
Every trader needs to know precisely when to enter or exit a forex market. The more ideal their entry/exit points, the better the chances of earning a profit. The DeMarker Indicator provides traders with the price levels at which they should buy or sell the currency pair and capitalise on the existing market trends. In our article, we will study the DeMarker Indicator in depth.
What is the DeMarker Indicator?
DeMarker is a technical indicator that can identify the market’s trend direction and provides traders with the ideal entry and exit price levels. It compares the current maximum and minimum currency pair prices to the previous maximum and minimum currency pair prices. At the same time, the indicator also helps traders identify overbought and oversold market conditions. The indicator generates values between 0 to 1.
- Values closer to 0 indicate an oversold market condition.
- Values closer to 1 indicate an overbought market condition.
- Values around but below 0.7 indicate a strong uptrend in the market and indicate traders to remain in their long positions due to the bullish market continuation.
- Values around but more than 0.3 indicate a strong downtrend in the market and indicate traders to remain in their short positions due to the bearish market continuation.
How to calculate the DeMarker Indicator
DeMarker Indicator = SMA (DeMMAX) [SMA(DeMMAX) + SMA(DeMMIN)] Where, DeMMAX = Difference between the current high price of the currency pair and the previous high price of the currency pair over a specific time period DeMMIN = Difference between the current low price of the currency pair and the previous low price of the currency pair over a specific time period
- When the current low/high is less than the previous low/high, a value of 0 is recorded while calculating the DeMarker Indicator.
- When the current low/high is more than the previous low/high, their difference is recorded as the value while calculating the DeMarker Indicator.
How to use the DeMarker Indicator Strategy
1. Select the trending chart
Choose the trending chart of the currency pair you want to trade. The DeMarker Indicator strategy works best in markets with a strong uptrend or downtrend and should not be used with a ranging market.
2. Select a timeframe
After choosing the price chart, select the tie period that you want to compare the maximum and minimum price levels to exit or enter the market. The default time period set by the indicator is 13. However, you can change the timeframe according to your trading strategy. This means you can select a lower timeframe if you are a short-term trader or a longer time frame if you are a medium or long-term trader.
3. Apply the indicator to the price chart
The next step is to apply the indicator to the price chart after setting the time frame. Watch how the indicator behaves in the trending market. Any level below 0.3 will indicate an oversold market, whereas any level above 0.7 will indicate an overbought market. These levels will provide you with market signals to enter or exit a trade.
4. Combine it with another technical indicator
You can combine the DeMarker Indicator with any other technical indicator like Fibonacci numbers or Bollinger Bands to confirm the market signals. If both indicators together provide the same market signals, you can rest assured that placing an entry or exit order accordingly will reap successful results.
5. Monitor the trades
The last step is to monitor the trades you place by using the DeMarker Indicator. You can either continue remaining in the trades or change your trading decision based on how the market continues to perform. Exit the trades when you feel the market has started moving against you.
Trading signals that the DeMarker Indicator provides
The DeMarker Indicator also provides price divergences in the market for trading in the opposite direction of the current trend due to an expected reversal.
The DeMarker Indicator also provides price breakthrough signals based on the values it provides. It indicates low market volatility and a possible price downtrend reversal when the indicator oscillates between 0.7 and 1. On the other hand, it indicates a possible price uptrend reversal when the indicator oscillates between 0 and 0.3.
Support and Resistance
The DeMarker Indicator provides traders with support and resistance lines based on the minimum and maximum currency pair prices. When the current high currency pair price is more than the previous high currency pair price, the level acts as the resistance line for the currency pair. On the other hand, when the current low currency pair price is lower than the previous low price of the currency pair, it acts as the support line for the currency pair.
Start trading with the DeMarker Indicator today
The DeMarker Indicator is helpful in analysing when to enter or with the market based on the minimum and maximum currency pair price levels. Start trading with Blueberry Markets to use the DeMarker Indicator with other technical indicators to receive confirmed market signals and trade accordingly! Sign up for a live trading account or try a risk-free demo account.
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