Monday, December 2, 2013

Demarker Forex Indicators

The Demarker indicator is named after Tom Demarker who claims to have developed this indicator to overcome the shortcomings of other overbought/oversold oscillators. There are different versions of it  in the market; in some cases the indicator uses 0 and 1 as the maximum and minimum of oscillation, while in others the typical 0-100 range is preferred.

Any level between 3 and 7 (or 30 and 70 if bigger numbers are preferred) is regarded as a neutral level characterizing a continuation phase. If the price is in an uptrend, and the indicator value is also rising, the trend is expected to go on. If we observe an uptrend, while the indicator value is falling, we're faced with a divergence, implying that the uptrend is slowly losing momentum and may suffer an abrupt reversal. Similarly, when the price is in a downtrend, but the indicator's value is rising, we suspect that the downtrends is weak. The oscillator and price action are converging, implying an ultimate reversal. If both the indicator and the price are in an uptrend, the interpretation is that the existing price pattern will continue to develop.

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