Trade signals of the indicator
Author's interpretation suggests to divide the signals of indicator DeMarker into 4 groups:
Behaviour of the line in critical areas (overbought/oversold).
The usual logic: output in the zone above 0.7 (70) − wait for max and turn down; in the area below 0.3 (30) − wait for min and move up.
Transactions open in the direction of the indicator's turn: a breakdown of level 70 down − SELL, level 30 up − open a purchase (BUY).
This DeMarker indicator’s signal is considered to be strongest.
Divergence of the price and indicator line (double/triple).
Bullish divergence is the signal of a downward trend. Bearish divergence is a signal of the growth. Triple divergence − is a strongest signal
Breakdown of the support/resistance line on the indicator.
Breakdown of the «trend» line, constructed by max/min indicator line, serves as a strong signal to buy/sell in the direction of the breakdown.
The appearance of the graphic patterns on the oscillator line.
Such signals are processed according to the standard scheme (Triangles, Head-Shoulders), but the accuracy of such patterns is much lower than similar figures on the price chart.
It is considered to be the weakest signal of DeMarker indicator. Nevertheless, in the most cases they signal about the forthcoming breakthrough on the price chart.
set period = 14
set highraw = high - ref(high,1)
set DeMax = if(highraw>0,highraw,0)
set MAdemax = sma(demax,period)
set lowraw = ref(low,1) - low
set DeMin = if(lowraw>0,lowraw,0)
set MAdemin = sma(demin,period)
set DEM = mademax/(mademax+mademin)
set Buy = crossover(dem,.3)
set Sell = crossover(.7,dem)