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.
The Demarker indicator is calculated by first determining a DeMin, and DeMax value, which roughly correspond to the high or low of a particular time period. The obtained values are then plugged into a formula which generates the value of the indicator itself.
If the high of today is greater than the high of yesterday, we set the DeMin value at the difference of highs of the two time periods (High of today – high of yesterday). Otherwise, DeMax is set to zero. Similarly, if the low of today is lower than the low of yesterday, the difference between the lows of the two periods becomes the value of DeMin (low of today- low of yesterday). If the low of yesterday is equal or lower than today’s low, DeMin is set to zero.
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Settings in the chart
Settings in Strategies
DeMarker can be used both separately and together with other indicators in the Strategy Builder.