In this article, we will explain the questions “Double Exponential Moving Average”, more commonly known as “What is DEMA Indicator?” and “How to Use DEMA Indicator?”. It has been referred to as the “Double Exponential Moving Average”. The highly preferred DEMA Indicator gives us price transitions and other signals.
What is a DEMA Indicator?
DEMA was introduced by Patrick Mulloy in the January 1994 issue of Technical Analysis of Stocks & Commodities magazine. It is interpreted as an Exponential Moving Average (EMA) at its core, and it does so faster. Of course, doing this quickly should not always be interpreted as good. Because its rapid reaction will affect instant price movements, it can produce signals on prices close to each other.
DEMA, which is preferred to follow price transitions, generates buy-sell signals to its users according to the course of the chart. With DEMA, which is preferred to determine the course of short, medium or long-term investments, users can make their risk analysis more secure. Of course, while these signals are produced, it can be preferred to determine the more known support and resistance points.
How to Use the DEMA Indicator?
Generally, it is preferable to combine a shorter pair of EMAs with a longer-term EMA. The purpose of doing this is to find the area where the 2 lines are intersected and to detect price returns. If prices rise above the moving average, a rise is to be expected. In the opposite case, there will be a possibility of giving a bearish signal. When we create DEMA, it is necessary to prefer a long-term DEMA than the first DEMA to be discarded. If the short-term DMA cuts above the long-term DEMA, this is a buy signal. If the opposite of this situation occurs, we can interpret the resulting chart as a sell signal.
For example; If we look at the points where the lines intersect in the graph we are working on Bitcoin and Turkish Lira we see in the image; The point at which the 25-day DEMA, which we call the medium term, cuts the long-term 50-day DEMA is seen as a buying point for users. If the medium-term DEMA line breaks below the long-term DEMA line, users will see this as a sell signal and move to a sell position. As we can see in the chart, there is a downward or upward price movement after the intersections. Thanks to this indicator, users aim to reduce their risk when determining their buy and sell positions.
