# GDEMA - Generalized Double EMA

Posted in Indicators of technical analysis

Generalized DEMA isn't any stand-alone indicator. It's just a combination of 2 moving averages with the possibility to modify their weight in the final indicator. First of the two indicators implied is well-known EMA (Exponential moving average). EMA as such is a very good trading tool. It can emphasize the last prices and adapt to the prevailing market conditions very fast, too.

The second indicator, implied to the calculation of GDEMA is Double Exponencial Moving Average. This type of moving average has almost the same advantages as EMA has, but in adition it is also much smoother, so we can get less false trading signals. (Beware: this is not DEMA according to Mulloy, but just EMA of EMA - i.e. Exponential moving average of Exponential moving average).

Generalized DEMA combines the indicators mentioned above into a single one in such way so we can modify their weights in the final GDEMA.

Generalized DEMA formula looks like follows:

1.    Define the weight "V"

2.    GDEMA = [EMA * (1 + V)] – [EMA(EMA) * V]

The "V" weight determines how much of the Double EMA will be taken into consideration in the calculation of final GDEMA. If the V = 0, then Generalized DEMA equals to pure EMA. Should the V = 1, then GDEMA would be clear Double EMA.

Generalized DEMA becomes less agressive form of Double EMA by such modification. According to our preferences, we can choose the rate of smoothing. The usual weight settings is to 0.7. In such case the Generalized DEMA indicator consists of 70 % Double EMA and just 30 % pure EMA.

GDEMA is an interesting combination of EMA (that follows the actual market conditions very fast) with Double EMA (that is much smoother and gives less false trading signals). If your trading system uses EMA, it could be quite interesting to replace it with Generalized Double EMA. You can find out very easy whether it could be of any use to you and your trading decisions.

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. 