Double Exponential Moving Average (DEMA)
The moving average helps the traders with entry and exit in trading. However, the unrelenting problem has been the slow process in most types of moving averages. In order to contest this situation and making the calculation of “Moving Average Methodology” more rapidly, the (DEMA) was intended.
What is the advantage of DEMA?
When there is uneven price movement, the DEMA “removes false signals” and “refines entries” thereby creating better probabilities during strong trends.
On a chart, it can be applied as a stand-alone indicator directly or we can integrate it into any technical indicators in order to resolve their values.
The (DEMA) consists of a single Exponential Moving Average and a double Exponential Moving Average where the outcome is less slow when compared to its two individual components (EMA) and a (DEMA). We can define it as “A single EMA calculated in association with a double EMA”.
The above chart shows two different double exponential moving averages;
How is it calculated?
DEMA is a amalgamated operation of single and double EMAs producing another EMA with less slow than either of the original two."
DEMA is a calculation of both single and double EMAs.
DEMA serves as a re-establsihment of the traditional (MA) methods and is generally preferred by traders due to its ability to spot reversals quicker.
This helps for an early entry into a new trend formed recently.
Add two or three DEMAs with different trackback periods and trade their crossovers.
DEMA can be applied as a stand-alone indicator.
DEMA can act as a complement to other indicators used for trending markets (MACD, Parabolic SAR etc).