Double Exponential Moving Average (DEMA)
DEMA - quick summary
Double Exponential Moving Average (DEMA) is a smoother and faster Moving average developed with the purpose of reducing the lag time found in traditional moving averages.
DEMA was first time introduced in 1994, in the article "Smoothing Data with Faster Moving Averages" by Patrick G. Mulloy in "Technical Analysis of Stocks & Commodities" magazine.
In this article Mulloy says:
DEMA indicator formula
DEMA default period (t) = 21.
DEMA is not just a double EMA.
It's a combination of a single + double EMA for a lesser lag than either of the original two.
How to trade with DEMA
DEMA can be used instead of traditional moving averages or the formula can be applied to smooth out price data for other indicators, which are based on moving averages.
DEMA can help to spot price reversals faster, comparing to regular EMA.
Let's compare 2 EMA crossover vs 2 DEMA crossover signals.
DEMA MACD for MT4
Some of Mulloy's original testing of DEMA indicator was done on the MACD, where he discovered that the DEMA-smoothed MACD was faster to respond, and despite producing fewer signals, gave higher results than the regular MACD.
Besides MACD, DEMA smoothing method can be applied to various indicators.
Patrick G. Mulloy says:
DEMA RSI indicator: DEMA_RSI_LK_V1.3.mq4
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