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RichardCox

Demark Indicators

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Technical analysts at some stage in their careers tend to look back on the work that has been done previously so that we can get a sense of how the science of price activity has developed. Some of the names that come to mind are Welles Wilder, Elliot, or Gann and what does tend to become clear is that most of these foundational ideas came a long time ago. One of the more recent innovators can be seen in Thomas Demark, who developed a series of indicators that help traders time the markets and identify trade entries.

Demark analysis attempts to deconstruct markets in an objective way and pays no attention to asset class or historical tendency. The Demark indicators differ from most of the other options available to technical analysts in that the main aim is to isolate regions marking significant trend activity and trend completion before those areas are clear with other forms of analysis.

 

Demark’s Calculations

 

Demark’s analysis depends on current market conditions, largely as a function of whether or not the open is higher or lower than the close of the session. When the session close is greater than the session open, the following calculation applies:

 

Daily High + Daily Low + Daily Close + Daily High = X

Projected Price High: = X/2 – Daily Low

Projected Price Low: X/2 – Daily High

 

When the session close is less than the session open, the following calculation applies:

 

Daily High + Daily Low + Daily Close + Daily High = X

Projected Price High: = X/2 – Daily Low

Projected Price Low: X/2 – Daily High

 

When the session close is equal to the session open, the following calculation applies:

 

Daily High + Daily Low + Daily Close + Daily High = X

Projected Price High: = X/2 – Daily Low

Projected Price Low: X/2 – Daily High

 

As can be seen from Demark’s calculations, most of the attention is paid to the extremes of price activity, relative to where prices closed for the given time interval. Many traders argue against any special focus placed on interval openings and closings, but DeMark is in the camp that suggests that these charting areas have special significance as this is likely where the majority of price activity is centered.

 

Market Assumptions

 

What new traders should remember is that DeMark’s indicators do not restrict trading methods to any one approach. Instead, trading plans can be constructed using other approaches to price analysis that view markets in alternate ways. Some of these options relate to intraday or short term methods while others can be viewed on a longer term basis to include daily or even weekly charting time frames.

 

The main point to remember is that the DeMark areas represent inflection points that are likely to contain price activity. Some of the methods that can be used in conjunction with this analysis involve trend positions or contrarian trades. Because of this, traders can use these support and resistance levels to adhere to a wide variety of trading styles and amounts of risk tolerance.

 

Prevalence in Market Consciousness

 

One of the main areas of strength for this form of analysis lies in the fact that it has remained within the market consciousness since its inception. Technical analysis, for better or worse, tends to work on this type of premise, as charting strategists work on self-fulfilling exercises. Demark indicators have been used by institutional firms and individual traders alike. Trend tendencies are viewed as being just as important as time frames as traders look for inflection points to gain an advantage on other areas of the market.

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Read Demark and Jason Perl and always have Demark sequential on the chart. My problem is simple...........quite often Demark (maybe 50%) nails the market turn on the Sequential 8/9 but I've yet to find a filter that identifies the failed turns and puts the odds more in my favour. Would welcome suggestions from anyone who has maybe discovered something I have missed.

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  koyasan said:
Read Demark and Jason Perl and always have Demark sequential on the chart. My problem is simple...........quite often Demark (maybe 50%) nails the market turn on the Sequential 8/9 but I've yet to find a filter that identifies the failed turns and puts the odds more in my favour. Would welcome suggestions from anyone who has maybe discovered something I have missed.

 

Just like any indicator, it works when it works and doesn't when it doesn't. Demark has quite a few other indicators to combine with sequential/combo. You can use one of those for confirmation.

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same reason as you cant really back test his ideas too well.

They need be used in conjunction with existing ideas and they ideally are designed to help improve things, by providing a little more insight into where you are relative to things.On their own they might not be worth much. :2c:

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  koyasan said:
Read Demark and Jason Perl and always have Demark sequential on the chart. My problem is simple...........quite often Demark (maybe 50%) nails the market turn on the Sequential 8/9 but I've yet to find a filter that identifies the failed turns and puts the odds more in my favour. Would welcome suggestions from anyone who has maybe discovered something I have missed.

 

Yes, I want to know. Pls. share your ideas.

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