Description

• Developed by Patrick Mulloy, DEMA uses a calculation of single and double EMA giving another EMA with a time lag lesser than both. DEMA is calculated by doubling recent data EMA and then deducting smoothened EMA from it, which makes it dynamic and less lagging
• DEMA is more responsive to recent market activity and gives early indication of trend reversals

Interpretation

• Similar to other averages, DEMA is also used for confirming trends and price direction
• The price line moving above DEMA indicates an uptrend suitable for Buy trades
• The price line moving below DEMA indicates an downtrend suitable for Sell trades
• It can be plotted with other indicators for crossovers giving effective signals

Default Parameters Used/Inputs

• Data line- Close line, High line, Open line, Low line or others
• Bars – number of bars for which DEMA has to be calculated

Returns/Output

DEMA graph line with quicker response to recent data

Formula

DEMA = [(2*EMA) – EMA(EMA)]