The DeMarker indicator (DeM) is an oscillator that relates recent price action to closing prices. As such, it's used to identify overbought and oversold areas giving you an idea about high risk and low-risk buying and selling areas.
DeMarker indicator formula is quite complicated. It is also certain that you will never have to calculate the value of this indicator yourself. That is why we will skip this part and focus on what is important, that is the correct interpretation of this tool.
This guide will teach you how to set up this indicator on IQ Option. Next, well use it to trade.
Setting up the DeMarker indicator on IQ Option
Once you've logged into your trading account and set up your Japanese candles chart, click on the indicators feature. Next, click on Momentum and finally select the DeMarker indicator.
Next, change the DeM settings. The period should be set to 14. The overbought line should be set to 70 while the oversold line should be set to 30. Click on apply.
The DeMarker line fluctuates between 0 and 100. Common values within this range are 70, 50 and 30.
Trading using the DeMarker indicator on IQ Option
If the DeM line is fluctuating around the 50 value, the markets are ranging and there's no clear trend. It's best to sit back and wait until the line moves above 70 or below 30.
If the DeMarker line rises above 70 a downtrend is imminent. However, you can also enter a buy position once you notice the DeM line approaching the 70 value.
If the DeM crosses the 30 line, you can enter a short sell position. Once it starts rising towards the 30, it's a signal for an upcoming uptrend. Place a long buy position in this case.
The DeMarker indicator is a good way to identify a developing trend. If it shows an uptrend, enter a buy position and vise versa.
How to use DeMarker indicator
The DeMarker can also be used to trade long-lasting positions.
If the DeM is crossing the 70 from above and moving towards the 50 value, you should enter a long sell position. This movement signals a downtrend.
On the other hand, if the DeM crosses the 30 from below approaching the 50 mark, this is a signal for an uptrend. Enter a long buy position.
The above-mentioned indicator trading signals are the simplest DeMarker indicator strategy. Remember that using the 1-minute chart time frame, your options should expire after 5 minutes or even more. If you analyse on a 5-minute chart, make sure that your trade lasts at least half an hour.
Summary and a few words on divergence
DeMarker is an oscillator because its values oscillate between 0 and 100. As with other oscillators, we can also detect the existence of divergence here. Divergence is the difference in behaviour between the indicator and the price. The existence of divergence usually heralds a market change in the form of a trend reversal.
If, for example, the market is falling, the price makes a bottom and then falls further by breaking through the previously made bottom, and we see something different on the oscillator. So on DeMarker we observe that this second bottom did not break through the previous one, then we have a bullish divergence and a good chance to reverse the downtrend and start an uptrend.
The DeMarker indicator is one of the easiest to read and use when trading. Now that you've learned how to use it, set it up in your IQ Option practice account today and use it. Share your results in the comments section below.
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