✔️ Information reviewed and updated in December 2023 by Eduardo López
Indicators such as DEMA are tools for graphical analysis, which can help cryptocurrency market operators to have a better understanding and know how to act in the face of price movements.
There is a wide variety of technical indicators that analyze trends, measure volatility, provide price averages, and more. All of these are important for operators' decision making.
In this article, we will explore a little more about the Double Exponential Moving Average indicator, or DEMA for its acronym in English. Which is an indicator widely used and known by operators in the financial market.
✨➡DeMA indicator definition
The Double Exponential Moving Average is a technical indicator developed by Patrick Mulloy in 1994, which attempts to eliminate the inherent lag associated with moving averages by placing more weight on current values.
The term "double" is because the value of an exponential moving average (EMA) is doubled, and to keep it in line with the real data and eliminate the delay, this value is subtracted from the exponential moving average that was calculated.
This indicator is faster and smoother than a standard moving averageIt can also be used instead of moving averages or in conjunction with other indicators such as MACD.
✨➡What is DEMA for?
Most traders use moving averages as a tool to identify high probability entry points and exit points that can be profitable for many years.
The double exponential moving average or DEMA helps to provide a solution to the difficult lag that occurs with respect to price action that is present in most types of moving averages. It does this by calculating the averages that allows you to react more quickly to changes and trends in prices.
✨➡How do you get DEMA?
The DEMA indicator is not only about two exponential moving averages, it is a calculation of single and double EMAs.
MME1 is the n-day exponential moving average over closing prices, and MME2 is the n-day exponential moving average of MME1. This indicator is equal to 2 multiplied by the difference between MME1 and MME2.
The moving average is found as a smooth curved line that provides a visual representation of the long-term trend of a given asset.
Today, trading platforms and chart analysis applications already have DEMA as a technical indicator that can be added to price charts.
✨➡Reasons to use it
In addition to using the DEMA as an indicator to find bullish and bearish signals, it can also be used in other indicators where the logic is based on a moving average.
Moving averages are a great technical analysis tool used to quickly interpret the long-term trend of an instrument or asset in a certain market.