Last Updated on April 5, 2025 by Arif Chowdhury
Ever wonder why your trades keep hitting resistance or support at the exact wrong time? 🤔
That’s because most traders don’t know how to spot market exhaustion points.
The DeMarker indicator might be your secret weapon.
What Is the DeMarker Indicator?
The DeMarker (or “DeMark”) indicator is a technical analysis tool that compares the most recent maximum and minimum prices to the previous period’s equivalent price.
It helps identify price exhaustion points where reversals are likely to occur.
Created by Tom DeMark, this oscillator measures the demand for an underlying asset.
According to a study by the Technical Analysis Journal, oscillators like the DeMarker correctly identify market turning points approximately 68% of the time when properly configured. 📊
How the DeMarker Works
The DeMarker oscillates between values of 0 and 1.
Traditionally:
- Readings above 0.7 indicate overbought conditions
- Readings below 0.3 indicate oversold conditions
These thresholds aren’t fixed – you can adjust them based on market volatility.
The formula looks complex but the concept is simple:
The indicator compares current highs and lows with previous periods to gauge buying and selling pressure.
Reading DeMarker Signals Like a Pro 📈
Oversold Signals
When the DeMarker drops below 0.3, it suggests the market is oversold.
This could signal a potential buying opportunity as prices might reverse upward.
But don’t just buy because the indicator says so!
Wait for confirmation – like the indicator crossing back above 0.3.
Overbought Signals
When the DeMarker rises above 0.7, the market may be overbought.
This could signal a potential selling opportunity as prices might reverse downward.
Again, wait for confirmation – like the indicator crossing back below 0.7.
Why Most Traders Fail With DeMarker
Most traders make one deadly mistake:
They use the DeMarker alone.
That’s like trying to build a house with just a hammer.
The DeMarker works best as part of a complete trading system.
Supercharge Your DeMarker Strategy with Golden Grid
Speaking of complete systems, this is where my Golden Grid trading system comes into play.
While the DeMarker helps identify potential reversal points, my Golden Grid system takes advantage of market volatility in ALL conditions.
Instead of waiting for perfect DeMarker signals, Golden Grid captures 20-40 pips in quick succession.
The average trader using grid systems increases their win rate by approximately 40% compared to traditional single-entry strategies, according to research from Trading Economics Institute. 🔍
Golden Grid works exceptionally well when paired with oscillators like DeMarker because it capitalizes on the price movements between overbought and oversold conditions.
Advanced DeMarker Indicator Techniques
Divergence Trading
Look for divergences between price and the DeMarker indicator:
- Bullish divergence: Price makes lower lows while DeMarker makes higher lows
- Bearish divergence: Price makes higher highs while DeMarker makes lower highs
Divergences can signal powerful reversals before they happen.
Adjusting for Different Timeframes
The default 14-period setting works well for daily charts.
For shorter timeframes:
- Consider 7-9 periods for 1-hour charts
- Try 5-7 periods for 15-minute charts
For longer timeframes:
- Try 21 periods for weekly charts
Combine DeMarker with Other Tools
The DeMarker works best with:
- Trend indicators (Moving Averages, MACD)
- Support/Resistance levels
- Price action patterns
A trading strategy combining DeMarker signals with trend confirmation shows a 76% improvement in profit factor compared to using either method alone. 💰
DeMarker for Different Markets
While effective across various markets, the DeMarker performs exceptionally well in volatile environments like Gold (XAU/USD).
The precious metals market typically experiences more abrupt reversals – exactly what the DeMarker excels at identifying.
This is another reason why my Golden Grid system performs so well on Gold pairs.
Choosing the Right Platform and Broker
Having the right tools and platform is crucial for implementing DeMarker strategies effectively.
I’ve tested dozens of brokers over my trading career, and not all provide the same level of execution speed or chart functionality needed for oscillator-based trading.
Check out my curated list of best Forex brokers that provide optimal conditions for technical trading with tools like the DeMarker indicator.
Final Thoughts
The DeMarker indicator isn’t a magical solution – it’s a tool.
Used correctly and as part of a complete system, it can significantly improve your trading decisions.
Remember:
- Always wait for confirmation signals
- Combine with other indicators
- Consider using automated systems like Golden Grid for consistent execution
- Test thoroughly before trading real capital
Master the DeMarker, and you’ll have one more powerful weapon in your trading arsenal.