There is a good example in the chart above. Although such a sell signal cannot be as strong, it can be a confirmation for bearish signals of other indicators. I should note that when a buy signal is not confirmed, that is, the five conditions above are not met, there is still a signal, but it is a sell signal. Therefore, one could have safely entered a buy trade at the current level when the new bar of June 14 opened (I marked it with a red cross in the chart).Īs we already know, this signal reached the target and provided the opportunity to gain on the BTCUSD movement up to the high at 14 000 USD. Furthermore, when the indicator exited the overbought zone, the price had been already trading above all the previous bars’ close levels. The asset is trading higher than the previous bars’ close levels.The next bar’s open following the reversal bar is equal to the previous bar’s close (there are no gaps).The close of the bar below the arrow is lower than the previous bar’s open and close (blue dots are far lower than the previous bar).The bar’s close under the red arrow is lower than the previous bar’s low (blue dots are above than the red dotted line).The DeMarker I indicator was below the level of 40 for not more than 13 bars - in our case it was only 5 days.Now, we can analyze the continuation pattern based on the above conditions. Immediately after that, we look for a point where the bar features the low before price exits the oversold zone.įinally, when the price went beyond the oversold zone on June 13, we can easily identify the low in the period when the ticker had been below 40, according to TD DeMarker indicator I. Afterwards, the price rolled down below 40 and the indicator entered the oversold zone. It is clear from the above chart that the BTCUSD was in the overbought zone (above 60) from the start till the end of May. The asset must be trading higher than at least one of the two previous closes.Īs an example, I’ll take the BTCUSD market situation that has recently occurred.The open of the next bar following the assumed reversal bar must be less than or equal to the close of any of the two previous bars.The bar’s close at the signal level must be lower than the previous bar’s open or close.The bar’s close at the signal level should be lower than the low of one or two bars ago. DeMarker I must not be below 40 for more than 13 bars.Now, let’s find out how this indicator’s signals are interpretedĪ buy signal should satisfy the following conditions: At the same time, the overbought zone will be above 60, and the oversold zone will be below 40. Calculate TD DeMarker I = divide the numerator by the denominator.Īs a result, we get a value that will move in the range from zero to 100 in the form of a fluctuating 13-period line. You add the value in the denominator to the sum of the differences between the lows in the same period.ģ.Calculate the denominator of TD DeMarker I equation The next values of the difference between the lows for each bar are added to the numerator over 13 consecutive bars.Ģ. If the low of the current bar’s is greater, a zero value is assigned to the nominator at this bar.If the current bar’s low is equal or less than the previous price bar’s low, then the difference between the previous day’s low and the current low are the numerator.Next values of the difference between the highs for each bar are added to the numerator over a series of 13 consecutive bars. If the current bar’s high is lower than the previous day’s high, then zero value is assigned to that bar.If the current bar’s high is higher or equal to the previous bar’s high, the difference is calculated and added to the numerator.TD DeMarker I compares the current and the previous trading day’s highs according to the following algorithm: Its calculation technique is very simple. It is similar to TD REI and aims to distinguish between trend and non-trend movements in the market, and then, having determined the trend, it searches for reversal points depending on how the indicator reacts to oversold and overbought levels. I’d like to start with the TD DeMarker I indicator. In this post I’ll continue describing technical tools developed by Thomas DeMark.
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