DeMarker Indicator

First step in the calculation of DeMax ( i ) is to define on the basis of the following correlations:

• If the current bar's high is above the previous bar's high, and then record the difference.
• If the current bar's high is at the same level or below the previous bar's high, and then assign a zero value.

If HIGH ( i ) > HIGH ( i - 1 ),
then DeMax ( i ) = HIGH ( i ) - HIGH ( i -1 ),
else DeMax ( i ) = 0.

The second step in the calculation of DeMax ( i ) is to define on the basis of the following correlations:

• If the current bar's low is below the preceding bar's low, and then record the difference.
• If the current bar's low is at the same level or above the previous bar's low, then assign a zero value.

If LOW ( i ) <>

DeMarker Indicator value is calculated:

DeMark ( i ) = SMA ( DeMax, N ) / ( SMA ( DeMax, N ) + SMA ( DeMin, N ) )

Where:

• HIGH ( i ) -current bar's high;
• LOW ( i ) - current bar's low;
• HIGH ( i - 1 ) - preceding bar's high;
• LOW ( i - 1 ) - preceding bar's low;
• SMA - simple moving average;
• N - the number of periods used for calculations.

DeMarker Indicator flactuates within the range between 0 and 1:

• The overbought area is where the indicator's value is between 0.7 and 1; and
• The oversold area is where the indicator's values is between 0 and 0.3.

DeMarker Indicator signals:

* Bullish divergence / bearish convergence is the main signal that the prevailing trend is weak:

• An example of a bearish convergence in accordance with Demark indicator.

• In a flat market, an exit from the overbought (oversold) area is the signal to sell (buy).

In order to add the Demarker Indicator to the chart in MetaTrader 4 use the "Insert -> Indicators -> Oscillators -> DeMarker" menu sequence.

source : www.alpari.com