What is the Demark 9 indicator?
Demark 9 is a technical analysis indicator created by Tom Demark, which is used to identify potential reversals in the market. The indicator is calculated by analyzing a series of price bars and comparing them to previous price actions.
How does the Demark 9 work?
The indicator is calculated by analyzing the closing price of each bar and comparing it to the closing price of the bar 9 periods ago. If the current closing price is higher than the closing price 9 periods ago, the indicator value is positive, indicating a potential uptrend. Conversely, if the current closing price is lower than the closing price 9 periods ago, the indicator value is negative, indicating a potential downtrend.
To use the Demark 9 indicator in a trading scenario, an investor would first identify the trend direction in the market. If the market is in an uptrend, the investor would look for a negative indicator value as a potential signal for a trend reversal. Conversely, if the market is in a downtrend, the investor would look for a positive indicator value as a potential signal for a trend reversal.
One of the advantages of the Demark 9 indicator is that it is able to identify potential trend reversals earlier than other indicators. This is because the indicator is based on a shorter time frame than other indicators, allowing it to respond more quickly to changes in market conditions. However, it is important to note that the indicator should not be used in isolation and should be used in conjunction with other technical analysis tools. Investors should also be aware of the limitations of the indicator and the potential for false signals.