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DEMA - Double Exponencial Moving Average

Posted in Indicators of technical analysis

DEMA (Double Exponencial Moving Average) is another type of moving average. I was created by Patrick Mulloy and first described in "Technical Analysis of Stocks and Commodities" magazine in 1994. DEMA follows the price graph closer than most of other moving averages, so the lag is lower and the curve is not so choppy.

DEMA is a special typ of Moving Average, that is close to Hull’s MA by its construction.

How to calculate the DEMA:

DEMA = (2 * n-days EMA) – (n-days EMA of EMA)

Length of the time period can choose every trader himself.

As you can see from the DEMA formula, it is not just double Exponential Moving Average. In fact, it is based on a single and a double EMA. So its title - "Double Exponential Moving Average'" is a kind of misleading then.

How to use the indicator: Its use is similar to other moving averages. Because of its special nature - low time lag and less swings it is quite close to HMA or TRIX. The trader himself must to choose whether he wants to use it mainly to identify the prevailing trend or get some Entry and Exit signals. First of all some calculations on the assets historical data should be made to answer the question.

If you are interested in a deeper study of this technical indicator and prefer ready to serve solutions, this section may be of  interest to you. There you can find all the available indicators in Excel file for download.