Foreign exchange market (Forex) these days is gaining a lot of popularity across the world. Forex describes the trading that is done in a foreign exchange market by two categories of individuals, the investors and the speculators. In the foreign exchange market, a trader buys a currency pair (e.g. Euros and US Dollars) when they expect the exchange rate to rise in the future. Similarly, if they expect that the exchange rate will fall in the future, then a trader prefers selling the currency pair before it falls.
Therefore, to take any action of buying or selling, there are certain indicators called the Forex indicators which helps the trader to make decisions whether a currency pair value will rise or will fall. There are many types of Forex indicators, among which there is a very important type of indicator, called the Forex demarker indicator.
Created by Tom DeMarker, this indicator serves as a very important tool that helps to measure demands for any currency pair i.e. this indicator is utilized for the technical analysis and makes a comparison between the most recent action of buying/selling on the price to the price of the previous period. DeMarker indicator (DeM) aids in identifying the price exhaustion and also identifies the tops and bottoms that take place in the market. DeM is used by the technical traders in order to determine the level of risk that will be involved when they make a transaction and then this indicator provides the traders with certain values in terms of numbers. For example, if the value is 60 and above, it indicates low volatility and low risk. But if the values are 40 and below, it indicates increasing risk which can further keep increasing.
The DeMarker indicator can be calculated by following a simple procedure. First, the DeMax and DeMin values are determined. DeMax reers to difference between the high prices of a particular time period and DeMin refers to the low prices of a time period. These values of DeMax and DeMin are then substituted in the following formula and the DeMark value is determined.
Formula: DeMark = N-period moving average of DeMax / (N-period Moving Average of DeMax + N-period Moving Average of DeMin)
On the whole, the DeMarker indicator is a very reliable as well as a simple indicator that is used in a foreign exchange market and can be used anytime when there is a need.