What is DeMarker?
The DeMarker is a technical oscillator that measures the demand of an asset, usually abbreviated as DeM.
It works by comparing the most recent high and low prices to the previous high and low prices of an asset.
By measuring the demand of an asset, DeMarker helps traders establish the price momentum direction and reversal points.
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Basically, DeMarker is a kind of an oscillator, showing an increase or decrease in price momentum upwards or downwards, as most oscillators do.
Components of DeMarker.
The DeMarker oscillator is made up of the following components:
- The upper limit (0.7).
- The middle level (0.5).
- Lower limit (0.3)
- A line oscillating about the 0 to 1 scale.
Basic Signals Provided by the DeMarker.
While defining the DeMarker oscillator, we mentioned that it shows the direction of price momentum and trend reversal points as well.
As such, the oscillator will provide bullish and bearish signals based on those two parameters.
Basically, if the DeMarker line crosses the middle 0.5 level upwards, the price has upward momentum.
On the contrary, if the line crosses the mid-level (0.5) downwards, the price has downward momentum.
The DeMarker oscillator shows price reversals by way of overbought and oversold conditions.
An overbought condition occurs where the DeMarker reads above the upper limit (0.7), meaning that buyers are getting exhausted and are about to be overpowered by sellers to have the price reverse downwards.
An oversold condition occurs where the DeMarker reads below the lower limit (0.3), meaning that sellers are getting exhausted and are about to be fixed by buyers to have the price reverse upwards.
That is basically how the DeMarker oscillator works.
DeMarker Trading Strategies.
In Olymp Trade, DeMarker can be used in various ways to formulate robust and profitable trading strategies.
Most traders, including seasoned experts, have known how to play around with the oscillator to make it work for them.
If you’d like to know their secrets, then this post is for you.
DeMarker, being a popular oscillator in Forex, has had so many trading strategies formulated around it. But do all these strategies really work perfectly? Are they all profitable?
I don’t know. But here are the top 5 DeMarker trading strategies I can vouch for. 100%.
- DeMarker-Fibonacci Trading Strategy.
- DeMarker-Price Action Trading Strategy.
- DeMarker-Stochastic Trading Strategy.
- DeMarker-Chart Pattern Trading Strategy.
- DeMarker-Trend Line Trading Strategy.
DeMarker-Fibonacci Trading Strategy.
The DeMarker-Fibonacci trading strategy brings together the DeMarker oscillator and the Fibonacci levels tool in a robust trading strategy.
Understanding Fibonacci Levels.
The Fibonacci Levels is a technical analysis tool that is made up of horizontal lines drawn in respect to Fibonacci numbers of 0%, 23.6%, 38.2%, 50%, 61.8%, and 100%.
On some platforms, there are more levels than those mentioned here.
The lines help in predicting possible support and resistance levels where the price is bound to reverse.
The Fibonacci Levels are just meant to show you retracement levels of the price.
Retracement levels are levels where the price, after pulling back from a definite trend, is likely to reverse in the direction of the primary definite trend.
That way, you can enter the market in the direction of the bigger general trend at those levels.
To use the Fibonacci Levels tool, the first thing you’ll have to do is to identify which kind of a trend you are dealing with.
An uptrend is typically a market that forms higher highs and lows.
A downtrend is one that forms lower highs and lows progressively.
You can also use other methods such as moving averages to determine a market trend.
Fibonacci Levels on an Uptrend.
If the market is an uptrend, identify a recent market low and let the first level form the support level there.
The rest of the readings of the Fibonacci Levels tool must be above level 1.
Identify also the most recent high and let the 100 level form the resistance level at that high.
Allow the price to rally upwards and then to retrace back downwards.
Observe to see the price pullback downwards to any of the Fibonacci Levels.
It must then retest the level without breaking it downwards so that you can resort to a bullish signal.
Fibonacci Levels on a Downtrend.
If the market is a downtrend, identify a recent market high and let level 1 form the resistance level there.
The rest of the readings of the Fibonacci Levels tool must be below the first level.
Identify also the most recent low and let the 100 level form the support level at that low.
Allow the price to rally downwards and then to retrace back upwards.
Observe to see the price pullback upwards to any of the Fibonacci Levels. It must then retest the level without breaking upwards so that you can resort to a bearish signal.
The DeMarker-Fibonacci Strategy.
Already know what the Fibonacci levels are and how they work, right? That, coupled with the knowledge of the DeMarker oscillator, brings you to a better position as far as this strategy is concerned.
So how exactly are these two indicators combined in perfect harmony to give a profitable trading strategy?
Let’s find out.
Remember, the primary trading indicator here is the Fibonacci.
As such, we will pick signals from Fibonacci and confirm them with the DeMarker tool.
Step 1 – Signal.
In the discussion about the Fibonacci, we already mentioned how bullish and bearish Fibonacci signals look like. Here is a reminder for you:
- Bullish Fibonacci signal – the market must be on an uptrend. The first level of the Fibonacci must be at a recent low while the 100 level must be at a recent high.
The price must retrace downwards to any of the Fibonacci levels and retest it without significantly breaking it downwards.
A successful retest of that Fibonacci level is a bullish signal.
- Bearish Fibonacci signal – the market must be a downtrend.
The first level of the Fibonacci must be at a recent high while the 100 level must be at a recent low.
The price must retrace upwards to any of the Fibonacci levels and retest it without significantly breaking it upwards.
A successful retest of that Fibonacci level is a bearish signal.
Step 2 – Confirmation.
Bullish or bearish signals obtained using the Fibonacci levels may not be self-confirmatory.
To be secure, we need to use the DeMarker oscillator to confirm the signals.
Here is what to look for.
- Bullish signal confirmation – the DeMarker oscillator line must be crossing the mid-level (0.5) from below upwards. Alternatively, the DeMarker oscillator must be showing an oversold condition by reading below the lower limit (0.3).
- Bearish signal confirmation – the DeMarker oscillator line must be crossing the mid-level (50) from above downwards. Alternatively, the DeMarker oscillator must be showing an overbought condition by reading above the upper limit (0.7).
Step 3 – Entry.
Enter a buy position following a confirmed bullish signal and a sell position after confirming a bearish signal.
Step 4 – Exit.
Exit a buy position when the DeMarker oscillator dips below the mid-level (0.5) from above.
On the other hand, exit a sell position when the DeMarker oscillator rises above the mid-level from below.
DeMarker-Price Action Trading Strategy.
The DeMarker-Price Action trading strategy combines the DeMarker oscillator with price action into a resourceful trading strategy.
You already understand how the DeMarker works right? So why not spend the next minute learning about price action?
Price Action.
Price action is defined as how the price behaves.
Using price action to trade simply means observing the highs and lows of the price and obeying what the price is saying about itself. This is without the influence of any indicator, oscillator, or other technical tools.
Price action may come packaged in many concepts such as:
- Support levels.
- Resistance levels.
- Trend breakouts and many more concepts.
The concepts we shall discuss here are support and resistance and how they blend with the DeMarker to produce the best outcome.
So you are wondering, what exactly is support? What about resistance?Â
Support and Resistance.
Support is a market price level that indicates a strong buy pressure.
It shows a surplus of buyers and so falling prices, almost always, seem to reverse upwards once they reach such price zone.
Resistance, on the other hand, is a market price level that indicates strong selling pressure.
It indicates a surplus of sellers and so rising prices, almost always, seem to reverse downwards once they reach such price zone.
The DeMarker-Price Action Strategy.
Step 1 – Signal.
Here is how to obtain bullish and bearish signals using support or resistance:
- Bullish signal – establish a zone of strong buy pressure, where falling prices, almost always, seem to reverse upwards once they reach that zone.
That will be the support zone and a bullish signal. Note that the support may have either a horizontal or diagonal layout.
- Bearish signal – establish a zone of strong sell pressure, where rising prices, almost always, seem to reverse downwards once they reach that zone.
That will be the resistance zone and a bearish signal. Note also that the resistance may have either a horizontal or a diagonal layout.
Step 2 – Confirmation.
You need to subject your bullish or bearish signal to confirmation with the DeMarker oscillator. Here is how to go about it:
- Bullish support signal confirmation – the DeMarker oscillator should be showing an oversold condition by reading below the lower limit (0.3).
Alternatively, the DeMarker oscillator line must be crossing the mid-level (0.5) from below upwards.
- Bearish resistance signal confirmation – the DeMarker oscillator should be showing an overbought condition by reading above the upper limit (0.7).
Alternatively, the DeMarker oscillator line must be crossing the mid-level (0.5) from above downwards.
Step 3 – Entry.
Enter a buy position following a confirmed bullish signal at a support zone and a sell position following a confirmed bearish signal at a resistance zone.
Step 4 – Exit.
Exit a buy position when the DeMarker oscillator dips below the mid-level (0.5) from above. On the other hand, exit a sell position when the DeMarker oscillator rises above the mid-level from below.
DeMarker-Stochastic Trading Strategy.
The DeMarker-Stochastic trading strategy knits together the DeMarker oscillator and the stochastic oscillator in a perfect harmony of a trading strategy.Â
How the Stochastic Oscillator.
The Stochastic Oscillator is a chart analysis tool that traders use to measure price momentum and spot potential price reversal points.
The stochastic oscillator consists of a fast line, a slow line, an upper limit (80), and a lower limit (20).
The fast line and the slow line oscillate on the Stochastic scale which runs from 0 to 100, sometimes crossing over each other.
Basically, stochastic shows upward price momentum when the fast line crosses over from below to above the slow line.
On the other hand, the oscillator shows downward price momentum when the fast line crosses over from above to below the slow line.
The above is how the stochastic oscillator can be used as a measure of price momentum.
So what about stochastic oscillator as an indicator of price reversal points? Find it below.
Did the price have an increase in upward momentum but now both stochastic lines read above the upper limit of 80?
Then such is an overbought condition showing that buyers are about to lose the grip and be overpowered by sellers.
A possible downward reversal will be confirmed when the fast line crosses over from above to below the slow line while still above the upper limit.
On the flip side, did the price have an increase in downward momentum but now both stochastic lines read below the lower limit of 20? T
hen such is an oversold condition showing that sellers are almost depleting their resources as buyers prepare to take over.
A possible upward reversal will be confirmed when the fast line crosses over from below to above the slow line while still below the lower limit.
The DeMarker-Stochastic Strategy for Olymp Trade.
Either the DeMarker or Stochastic oscillator can be a primary tool here.
Whichever tool provides a signal first becomes the primary tool, then the other is used to confirm that signal obtained.
Step 1 – Signal.
As mentioned earlier, bullish and bearish signals can be obtained using either DeMarker or Stochastic. Here are the various specifications of bullish and bearish signals:
- Bullish DeMarker signal – the DeMarker line crosses the mid-level (0.5) from below upwards.
Alternatively, the DeMarker Oscillator shows an oversold condition by reading below the lower limit (0.3).
- Bullish Stochastic signal – the fast stochastic line crosses over from below to above the slow line at any level of the scale.
Alternatively, both stochastic lines are showing an oversold condition by reading below the lower limit (20).
The fast line must then cross over from below to above the slow line while the two are still at that oversold level.
- Bearish DeMarker signal – the DeMarker line crosses the mid-level (0.5) from above downwards.
Alternatively, the DeMarker Oscillator shows an overbought condition by reading above the upper limit (0.7).
- Bearish Stochastic signal – the fast stochastic line crosses over from above to below the slow line at any level of the scale.
Alternatively, both stochastic lines are showing an overbought condition by reading above the upper limit (80).
The fast line must then cross over from above to below the slow line while the two are still at that overbought level.
Step 2 – Confirmation.
In step 1, we have discussed the various bullish and bearish signals provided by both tools.
If you get a bullish signal from one tool, confirm it with a bullish signal from the other.
On the other hand, if you get a bearish signal from one tool, confirm it with the bearish signal of the other as specified above.
Did you get a bullish DeMarker signal?
For confirmation, you must wait until stochastic gives you a confirmation exactly as specified in the bullish stochastic signal in step 1.
The vice versa is true if you obtained a bullish signal from stochastic.
On the other hand, did you obtain a bearish stochastic signal?
For confirmation, you must wait until DeMarker gives you a confirmation exactly as specified in the DeMarker bearish signal in step 1.
The vice versa is true if you had a bearish signal from DeMarker.
Step 3 – Entry.
Enter a buy position following a confirmed bullish signal and a sell position following a confirmed bearish signal.
Step 4 – Exit.
Exit a buy position when the DeMarker oscillator dips below the mid-level (0.5) from above or stochastic dips below a reading of 50 from above.
On the other hand, exit a sell position when the DeMarker oscillator rises above the mid-level from below or stochastic rises above a reading of 50 from below.
DeMarker-Chart Pattern Trading Strategy.
DeMarker-Chart Pattern trading strategy brings together the DeMarker oscillator and various chart patterns to form a high probability trading strategy.
You know the DeMarker, but what exactly is this thing we are calling chart pattern?
If you are groping in the dark as far as chart pattern is concerned, then you will get your answers below.
Chart Patterns.
Chart patterns are definite shapes of the price of an asset that have bullish or bearish connotations.
Basically, chart patterns are either bullish or bearish.
A further classification will give you continuation and reversal chart patterns within bullish or bearish patterns.
Well, our focus will only be on bullish or bearish.
Continuation or reversal is just a subset within this broader classification of chart patterns.
So what are the examples of bullish chart patterns? They include:
What about bearish chart patterns? Here are some of them:
Wanna know how they look like?
I guess it will be of great essence to have a look at how the various chart patterns look on the chart for a better understanding of the strategy at hand. Here we go:
Bull Flag.
A bull flag is represented by a long and rapid upward price move that forms the flag pole, then a short downward retracement forming the real flag.
If the price breaks above the trend line joining the highs within the real flag, then it is meant to continue upwards.
Bear Flag.
A bear flag is represented by a long and rapid downward price move that forms the flag pole, then a short upward retracement forming the real flag.
If the price breaks below the trend line joining the lows within the real flag, then it is meant to continue downwards.
Ascending Triangle.
An ascending triangle is represented by a price move forming a horizontal line with the swing highs and an upward sloping trend line can be drawn along its swing lows.
A breakout above the horizontal line joining the swing highs means the price will continue upwards.
Descending Triangle.
A descending triangle is represented by a price move forming a horizontal line with the swing lows and a downward sloping trend line can be drawn along its swing highs.
A breakout below the horizontal line joining the swing lows means the price will continue downwards.
Double Bottom.
A double bottom is represented by two almost equal price swing lows forming a ‘W’ shape.
After the second swing low, if the price breaks above the level of origin of the price move, then it is meant to continue upwards.
Double Top.
A double top is represented by two almost equal price swing highs forming an ‘M’ shape.
After the second swing high, if the price breaks below the level of origin of the price move, then it is meant to continue downwards.
Head and Shoulders.
The Head and shoulders pattern is represented by a lower first swing high, then a higher second swing high followed by a third swing high at the same level as the first.
As such, the second or middle swing high is the highest, then the first and third are at the same lower level.
That way, the middle swing high is the head and the first and third swing highs form the two shoulders.
If the price breaks below the neckline, then it is meant to continue downwards.
Inverted Head and Shoulders.
The inverted head and shoulders pattern is the opposite of the head and shoulders pattern.
It is represented by a higher first swing low, then a lower second swing low followed by a third swing low at the same level as the first.
As such, the second or middle swing low is the lowest, then the first and third are at the same higher level.
That way, the middle swing low is the inverted head and the first and third swing lows form the two inverted shoulders. If the price breaks above the neckline, then it is meant to continue upwards.
The DeMarker-Chart Pattern Strategy for Olymp Trade.
You now understand what chart patterns are, in addition to how the DeMarker works.
So, what next?
How to apply chart patterns and DeMarker to make this trading strategy.
Step 1 – Signal.
The trading signal here is obtained by observing chart patterns.
Here are some of the bullish and bearish chart patterns you can see on any price chart:
- Bullish signal – a bullish chart pattern signal can be a bull flag, ascending triangle, double bottom, an inverted head, and shoulders. These are among other bullish chart patterns which we did not mention.
- Bearish signal – a bearish chart pattern signal can be a bear flag, descending triangle, double top, and head and shoulders.
Note that the mentioned are not the only bearish chart types that exist, there are many more.
Step 2 – Confirmation.
Did you observe a bullish or bearish chart pattern?
It must proceed till the end, until it has broken the levels we specified when discussing the chart patterns in detail, as the first confirmation.
The subsequent confirmation from the DeMarker oscillator is what we shall deal with in this section:
- Bullish signal confirmation – the DeMarker oscillator line must be crossing the mid-level (0.5) from below upwards. Alternatively, the DeMarker oscillator must be showing an oversold condition by reading below the lower limit (0.3).
- Bearish signal confirmation – the DeMarker oscillator line must be crossing the mid-level (50) from above downwards. Alternatively, the DeMarker oscillator must be showing an overbought condition by reading above the upper limit (0.7).
Step 3 – Entry.
Enter a buy position following a confirmed bullish signal and a sell position after a confirmed bearish signal.
Step 4 – Exit.
Exit a buy position when the DeMarker oscillator dips below the mid-level (0.5) from above. On the other hand, exit a sell position when the DeMarker oscillator rises above the mid-level from below.
DeMarker-Trend Line Trading Strategy.
This strategy blends the use of the DeMarker oscillator with the use of trend lines to trade profitably.
I know you are well conversant with the DeMarker oscillator, but what the hell is a trend line?
Trend Line.
A trend line is a drawing tool used to draw significant price levels horizontally and diagonally on the price chart.
It is a technical analysis tool useful to traders who are fond of drawing on the chart.
Trend lines actually form the basis of price channels, for they are the very tools used to draw price channels.
Price Channels and Trend Lines.
Trend lines are used to connect swing highs and swing lows of the price to get price channels.
Price channels, in turn, give the general direction of the price and aid in making trading decisions.
If using trend lines, you join swing highs and swing lows of the price and get an upward sloping channel, then the general price direction is upward.
In this scenario, the most important trend line is the one joining the swing lows of the price.
The price is meant to always obey such a trend line and if it breaks it downwards, then that uptrend has weakened and may reverse shortly.
On the other hand, if using trend lines, you join swing highs and swing lows of the price and get a downward sloping channel, then the general price direction is downward.
In this scenario, the most important trend line is the one joining the swing highs of the price.
The price is meant to always obey such a trend line and if it breaks it upwards, then that downtrend has weakened and may reverse soon.
There is also a possibility of joining swing highs and swing lows with trend lines to get a horizontal price channel.
In such a situation, both the upper and lower trend lines are important.
The price is meant to reverse downwards at the upper trend line and upwards at the lower trend line.
Breaking any of those lines nullifies the price range and renders the setup distorted.
The DeMarker-Trend Line Trading Strategy.
Step 1 – Signal.
Spot a price section of interest which must of course be towards the ongoing end of the price.
Next, join the major highs of the price with a trend line.
Use another trend line to join the major lows of the price, to obtain a price channel bound by two trend lines below and above.
The channel may be perfectly horizontal or even diagonal.
Here are the possible bullish and bearish signals:
- Bullish signal 1 – the price channel is sloping upwards, meaning that the price is on an uptrend.
The price is at the lower trend line joining the lows of the price, having retested the trend line without breaking it downwards.
- Bullish signal 2 – the price channel is horizontal, meaning that the market is ranging.
The price is at the lower trend line joining the lows of the price, having retested the trend line without breaking it downwards.
- Bearish signal 1 – the price channel is sloping downwards, meaning that the price is on a downtrend.
The price is at the upper trend line joining the highs of the price, having retested the level without breaking it upwards.
- Bearish signal 2 – the price channel is horizontal, meaning that the market is ranging.
The price is at the upper trend line joining the highs of the price, having retested the level without breaking it upwards.
Step 2 – Confirmation.
Having a perfect trend line signal is not just enough.
You need to subject your bullish or bearish signal to confirmation with the DeMarker oscillator. Here is how to go about it:
- Bullish signal confirmation – the DeMarker oscillator should be showing an oversold condition by reading below the lower limit (0.3).
Alternatively, the DeMarker oscillator line must be crossing the mid-level (0.5) from below upwards.
Bearish signal confirmation – the DeMarker oscillator should be showing an overbought condition by reading above the upper limit (0.7). Alternatively, the DeMarker oscillator line must be crossing the mid-level (0.5) from above downwards.
Step 3 – Entry.
Enter a buy position following a bullish signal and a sell position after a bearish signal, as it is obvious.
Step 4 – Exit.
Exit a buy position when the DeMarker oscillator dips below the mid-level (0.5) from above. On the other hand, exit a sell position when the DeMarker oscillator rises above the mid-level from below.
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