Hello, traders! Today we’ll speak about the most trivial, but very useful indicator that’s called DEMA. As you know, moving average is a backbone of 90% complicated indicators. It’s able to give lots of information about the price action. Well, let’s speak about it.
The double exponential moving average (DEMA) is a technical indicator introduced by Patrick Mulloy in his January 1994 article "Smoothing Data With Faster Moving Averages" in Technical Analysis of Stocks & Commodities magazine.
The DEMA uses two exponential moving averages (EMAs) to eliminate lag, as some traders view lag as a problem. The DEMA is used in a similar way to traditional moving averages (MA), but DEMAs react quicker than traditional MAs.
How to use DEMA?
-The average helps confirm uptrends when the price is above the average, and helps confirm downtrends when the price is below the average. When the price crosses the average that may signal a trend change. -Indicate areas of support or resistance. -Cross overs of 2 DEMAs. We sometimes draw fast DEMA(20) and slow DEMA(50). When the fast line crosses the slow below, it’s a bearish signal, when above - bullish. It’s consider to be a good entering signal. However, we shouldn’t forget that the indicator is still lagging.
Guys, I should remember you that every indicator shouldn’t be used in solo. You should only use them in conjunction with other indictor when they confirm each other. I hope, this knowledge will boost your trading skills and make your trading staff more interesting and profitable. Have a nice day, dear traders.