DEMA Indicator

DEMA Indicator

DEMA indicator for MT4 provides forex bullish and bearish crossover trading signals earlier than classic moving averages

The DEMA indicator for MT4 was developed by Patrick Mulloy in the quest to reduce the lag in moving averages. DEMA – Double Exponential Moving Average results in lesser delay or lag compared to the standard simple moving averages. The indicator is the combination of the single and double exponential moving average with a lag lesser than the single EMA or double EMA. So, the indicator can deduct price reversals earlier than the classic moving averages. As a result, forex traders can use the indicator to buy and sell profitably.

As the indicator is simple to use, new and advanced forex traders can apply the indicator and trade successfully. Moreover, the DEMA if used for calculation of other technical indicators like the MACD results in early signals than the classic MACD. So, advanced forex traders can use the DEMA in indicators and trading systems that use classic moving averages and smoothen the indicator.

The indicator works well in all intraday price charts and the daily, weekly, and monthly price charts. So, forex traders can use the indicator for scalping, short-term and long-term trading strategies. Additionally, traders can download the indicator for free and install it easily.

DEMA Indicator For MT4 Trading Signals

The above GBPUSD H1 candlestick price chart shows the indicator for MT4 in action. The indicator plots the DEMA line as Red.
The direction of the indicator shows the potential direction of the market trend. If the indicator line points up, it indicates a bullish market condition. Similarly, the indicator line pointing downwards indicates a bearish price trend.

However, the best trading strategy is to trade with the crossover of slow and fast period. The crossover of these two indicator instances involves the classic crossover trading strategy. But the DEMA crossover produces early trading signals compared to other moving average crossovers and makes it more profitable to trade.

If the fast DEMA crosses the slow DEMA upwards, it indicates a bullish crossover. So, forex traders should enter a buy position with a stop loss below the previous swing low. The crossover does not provide a profit target, so traders can exit at an opposite trading signal or with a good risk reward ratio.

Similarly, if the fast DEMA crosses the slow DEMA downwards indicating a bearish market condition. Traders should place a sell trade with a stop loss above the previous swing high.

Conclusion
The DEMA indicator for MT4 is indeed responsive to the price movements much better than the classic moving averages. However, since the indicator line is too close to the price it may result in confusion with new forex traders. Though the DEMA crossover trading strategy works well, the indicator cannot be used as a stand-alone. Finally, like any technical indicator, it provides the best results when trading with the confluence of other technical tools and indicators.