Formula for DeMarker Indicator:
DeMax ( i ) is calculated.
If HIGH ( i ) > HIGH ( i — 1 ) , then DeMax ( i ) = HIGH ( i ) — HIGH ( i — 1 ), otherwise DeMax ( i ) = 0.
DeMin (i) is calculated.
If LOW ( i ) < LOW ( i - 1 ), then DeMin ( i ) = LOW ( i - 1 ) - LOW ( i ), otherwise DeMin ( i ) = 0.
DMark ( i ) indicator is calculated:
DMark ( i ) = SMA ( DeMax, N ) / ( SMA ( DeMax, N ) + SMA ( DeMin, N ) ).
Where:
HIGH ( i ) — maximum price of the current bar;
LOW ( i ) — minimum price of the current bar;
HIGH ( i — 1 ) — maximum price of the previous bar;
LOW ( i — 1 ) — minimum price of the previous bar;
SMA — simple moving average;
N — number of periods used for calculation.
Thus, DeMarker Indicator is built on the basis of the following comparisons: if the maximum of the current bar is higher than the maximum price of the previous bar, the corresponding difference is registered. If the maximum price of the current bar is equal or lower than the maximum of the previous bar then a zero value is registered. Thus, the differences got within the period are summed up. The figure we get becomes the numerator of the DeMarker Indicator and it is divided by the same value plus the sum of the differences between the minimum prices of the previous bar and the current one within a period. If the minimum of the current bar is lower than the minimum of the previous bar the corresponding difference is registered, otherwise a zero value is registered.
DeMarker Indicator fluctuates between 0 and 1. The indicator values between 0.7 and 1 form the overbought area, whereas its values between 0 and 0.3 form the oversold area.
DeMarker signals:
Bullish divergence / bearish convergence is the main signal indicating the weakness of the current trend (Figure 1);
Exit from the overbought (oversold) area when the market is flat is a selling (buying) signal.
