Do you remember when Olymptrade’s analyst discussed about oscillators? Do you remember the concept of overbought and oversold conditions? If not, please read Olymptrade’s lifehacks once again, it will help you in understanding today’s topic. In addition to Relative Strength Index, Stochastic Oscillator, the DeMarker is also designed to compare the most recent price to the previous prices’ periods to measure the demand of an asset.
The DeMarker indicator is a technical analysis oscillator developed by Thomas Demarker. The DeMarker indicator is bounded between 0 and 1. It has a base value of 0.5, where in general rule, the overbought level is set at 0.7 and the oversold level at 0.3. In standard settings, DeMarker is calculated on 14-periods, of course traders can modify to any preferred period. Please, look in the image that our Olymptrade’s analyst prepare for you to explain the indicator.
Ranging Markets Signals
Traders should look when the DeMarker falls below 0.3, entering the oversold zone and rises back above it, to give a buying opportunity. On the other hand, traders should look to selling positions when the DeMarker rises above 0.7 at overbought zone and falls back below it, indicating that a bearish trend may start. Please, look at the next image that our Olymptrade’s analyst prepare for you to explain the signals of oversold and overbought conditions.
Also, if you prefer, it is possible to select the DeMarker indicator in the style of Histogram. It is simpler to identify the strength of the price movement and its possible trend reversal. When bars are green, DeMarker shows a bullish trend. Consequently, when bars are red, the indicator represents a bearish movement. Look at the next image showing how to change the DeMarker’s settings.
Since DeMarker is an oscillator, Olymptrade’s analysts also know that it can be used to compare signals with different oscillator, such as RSI. Below the image prepared by Olymptrade’s analyst, you can check both the DeMarker and the RSI on the chart.
It is possible to visualize that the two lines look almost the same. The main difference is the DeMarker travels faster, giving more signals in oversold or overbought zones. But be careful, quantity in signals doesn’t always mean quality of entry points. The usage of DeMarker or RSI depends on what type of trader you are (aggressive or conservative).
Many traders, including Olymptrade’s analyst pay attention to the fact that the DeMarker indicator warn a potential market reversal with the oversold and overbought zones, and it should be included in your trading system. We wish you successful trading with DeMarker!