The Demarker oscillator was developed by Thomas DeMark in the 1990s. It is a momentum oscillator that measures the demand for an asset and compares the most recent price level with the previous high or low price. The oscillator ranges from 0 to 1, with a reading of 0 indicating that the price has closed at the lowest low over the last ‘n’ periods, while a reading of 1 indicates that the price has closed at the highest high over the last ‘n’ periods.
Oscillators are popular among traders on electronic contracts markets due to their sensitivity to price changes and ability to indicate trend reversals or corrections, allowing for short-term trading and profit in any market movement. Demarker is a noteworthy oscillator that can serve as the basis for a trading strategy, and it is already available as an Expert Advisor on the IQ Option platform for traders to try out.
Short Intro into The Demarker Indicator
While Demark Lines may look similar to other oscillators, such as RSI, upon closer inspection it is clear that they are not the same. Although both have oversold and overbought zones with levels at 30 and 70 and a signal line, Demarker is more responsive to price fluctuations, giving it an edge over RSI.
The Demarker oscillator can be used in different ways, including as a confirmation tool for trend reversals, a tool for identifying overbought or oversold conditions, and a tool for identifying divergence. It can also be combined with other indicators or used with different timeframes to get more accurate signals.
Another advantage of Demarker is its ability to identify potential trend reversals early on. When the oscillator crosses the overbought or oversold level, it indicates that the current trend is losing momentum and may soon reverse.
It is also worth noting that, like other oscillators, Demarker works best in combination with other indicators and analytical tools. Traders can use Demarker in conjunction with trend-following indicators, such as moving averages, to confirm the direction of the trend and identify entry and exit points.
The Demarker oscillator features overbought and oversold zones, with levels above 70 and below 30, respectively, indicating the need to buy contracts upon exiting these zones, as they indicate a trend reversal or correction.
A CALL option can be purchased when the line exits the 0-30 zone.
A PUT option can be purchased when the line exits the 100-70 zone.
Demarker, similar to other oscillators, can effectively indicate divergence.
Set the contract duration to 2 periods, meaning if trading on a 15 minute timeframe, expiration should be 30 minutes.
While the indicator’s instant reaction to price changes can be advantageous in responding to trend changes, it can also be a disadvantage as the oscillator may be affected by market noise, especially on lower timeframes. Despite being like other oscillators like RSI, Demarker is more “sensitive” to price changes, giving it an advantage. It is important to keep in mind the overbought and oversold zones, as well as the state of divergence, when using Demarker as an indicator for trading. However, it’s important to note that the instant reaction of the indicator to price changes can be both an advantage and a disadvantage, and traders should be mindful of market noise when using it on lower timeframes.
NOTE: This article is not an investment advice. Any references to historical price movements or levels is informational and based on external analysis and we do not warranty that any such movements or levels are likely to reoccur in the future.
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