Trend indicators
DEMA: Double Exponential Moving Average
A faster moving average that cuts much of the usual delay, so it turns closer to the actual turning points.
The idea in plain words
All moving averages lag behind the price. DEMA estimates that lag and subtracts it: it takes an ordinary EMA, measures how far a second, smoother EMA trails it, and pushes the line forward by that amount.
How it is calculated
Calculate an EMA of the price, then an EMA of that EMA. DEMA is twice the first minus the second.
EMA1 = EMA(close, N)
EMA2 = EMA(EMA1, N)
DEMA = 2 × EMA1 − EMA2 (default N = 14)How to use it
- Use it where you would use an EMA but want quicker signals.
- Crossovers of price and DEMA, or of a short and a long DEMA, signal trend changes earlier.
Drawing conclusions
- Because it is quick, DEMA is better at catching turns and worse at ignoring noise.
Example
With N = 14 on a 1-hour chart, DEMA turns down two candles after a top where a 14-period EMA turns down four or five candles after it.
Prices in examples are illustrative.
Watch out for
- More speed means more false signals in choppy markets.
A little history
Patrick Mulloy introduced DEMA in Technical Analysis of Stocks & Commodities magazine in 1994.
Educational content only. No indicator or pattern predicts the future, and nothing here is investment advice.