Description

• Founded by Thomas Demark, it is used to identify the demand of an instrument by the market participants
• It oscillates between 0 to 100
• It compares high to high and low to low for understanding price strength, as stock in bullish trend makes higher highs and higher lows

Interpretation

• Indicator falling below 30 is considered to be oversold and price reversal is expected
• Indicator rising above level 70 is excessively bought and price correction is expected
• Divergence between price and indicator helps to identify false breakout and anticipate strong reversals

Default Parameters Used/Inputs

• High Line
• Low Line
• Period

Returns/Output

Demark Indicator value of stock for the specified period

Formula

DeMark = SMA(DeMax, N)/(SMA(DeMax, N)+SMA(DeMin, N))
where, DeMax = If high(i) > high(i-1), then high(i)-high(i-1), else = 0
DeMin = If low(i) < low(i-1), then low(i-1)-low(i), else = 0