The DeMarker (DM) indicator is rarely used by traders in the determination and analysis of a currency pair. However, that does not mean this indicator is not good, it’s just that there aren’t many who use it. This indicator is similar to other indicators such as RSI or Stochastic Oscillator, which relies on oversold and overbought territory as a sign for traders to buy or sell.
The DeMarker indicator is included in the Oscillator indicator group, if we check it on MT4. This indicator will be outside the main screen if we apply it, so it does not interfere with our view of the screen that contains the candlestick display. It also makes easier for us to see the correlation between this indicator and the candlestick so that it helps the analysis to be better. Compared to other indicators in the Oscillator group, DeMarker is also quite simple because there is only one line as a pointer.
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DeMarker Display (below) on the MT4
This simple line also provides convenience in terms of organization. DeMarker basically uses period 14 automatically. We can change the value of this period as we wish, but don’t forget that the change value should be part of a trading strategy. The period referred here is the number of candlesticks that are the basis for the DeMarker calculation, so if the value is 14, it means that there were 14 previous candlesticks that were used for calculating DeMarker values.
Apart from lines, there are also upper and lower limit values. These values are .300 and .700, which act as a limit for oversold and overbought areas. Values above 0.700 are called overbought and values below 0.300 are called oversold. From this limitation, later it will be used as an analysis to buy or sell the pair forex.
How Is Trading System Using DeMarker?
As already mentioned, how to trade using DeMarker is actually quite easy. Pay attention to the lines contained in this indicator and note the existing oversold and oversold limit values. Here, the entry approach consists of two, namely following a trend that is happening or opposing a trend that has already happened.
For trading system which is to follow the trend that is happening, we can enter an entry buy when the line crosses the value of 0.700. Conversely, for a sell entry, we enter a sell entry when it passes the value of 0.300. As long as the line is above 0.700, we will hold long positions. The same is for sell, as long as the line is below the value of 0.300, the position continues to be maintained. This technique is suitable when the candlestick continues to move in one direction, because it shows that the market is in a strong trend.
Meanwhile, if the market is calm or sideways, then the best possibility is to use this indicator to counter the direction. We can do an entry buy when DeMarker approaches 0.300 or below this value and then we can sell when the line on the indicator shows 0.700 or exceeds that value. The distinctive feature of a sideways situation is that the candlestick does not move much or move within a limited range.
Because it is included in the Oscillator group, this indicator is classified as a leading indicator, aka an indicator that moves “earlier” than price. Therefore, to avoid the possibility of wrong entry because it moves too fast, it should be paired with other indicators that are “slower” than price. If you do not want to be paired with another indicator, then the stop loss must be considered.
What about Stop Loss and Target Profit?
Stop loss and profit target targets can be done with various approaches. Among them is the stop loss set when the DeMarker line continues to fall near the extreme values of the indicator. That is, if we do a buy order when DeMarker is below 0.300 then we can set a stop loss near the value of 0. Likewise if we do sell orders when overbought, then the stop loss can be set near the value of 1.00 from the DeMarker.
Example of Trading Using DeMarker
Then for the profit target, it can be set by adjusting it when the DeMarker line moves to other extremes. For example, if we buy when the indicator shows oversold, the profit setting is made at the overbought level or above 0.700. Conversely, if you make a sell order when the indicator line above is overbought, the profit target that can be set is when the line goes to the oversold area around 0.300. The above method is a common way to manage TP and SL.
Alternatively, using the pips value approach. The value used is for example 30 or 50 pips or other values. Can also rely on changing the shape of the candlestick. But both of the methods he uses are rarely used by traders who use this DeMarker.
What to Look For?
This simple trading system can generate profits if done with the right system. This forex trading strategy can get consistent profits if the existing system is equipped with SL and TP that we have set before. Don’t try to break the rules, especially about SL which is often not installed when trading.
As already mentioned that this indicator is an oscillator, so sometimes there is a possibility of lagging due to the delay of the indicator responding to prices. This is because this indicator counts the previous candlestick and then displays it in the form of lines on the indicator display. Therefore, it is better to use the help of other leading indicators to give a better picture before entering.
Because this indicator is based on the data and the period has been determined in the parameters, so the time frame or time column should be used at least 1 hour (H1). This is to provide a clearer picture of the direction of the line. It is feared that many indicators will show errors if using a smaller time column because there is also less data collected. The bigger the time column used, the better.
We can set the period parameters as needed. Keep in mind the smaller the value, the fluctuations in the line will increase. Conversely, if the more regulated period the fluctuations in the indicator line will be more horizontal. Don’t misjudge the period because if it is too high or too low the fluctuations will have an impact on the success of the trading level later.
Finally, indicators are tools and not the sole element of trading. Consider other things that might influence the successful use of this indicator. Stay away from or even if necessary don’t trade ahead of important news releases or speeches that could cause price fluctuations. Even though we have completed it with SL, of course it is better to add unnecessary losses.