Generalized Double DEMA Indicator
MT5Also Available for MT4Generalized Double DEMA indicator for MT5 gives forex bullish and bearish crossover signals earlier than classic moving averages.
Description
The Generalized Double DEMA indicator for MT5 was developed by Patrick Mulloy to reduce the lag of moving averages. DEMA – Double Exponential Moving Average results in less lag or lag compared to standard simple moving averages. The indicator is a combination of a single and double exponential moving average with less lag than a single or double EMA. Thus, the indicator can subtract price reversals earlier than classic moving averages. As a result, forex traders can use the indicator to buy and sell for profit.
Because the indicator is easy to use, new and experienced forex traders can apply the indicator and trade successfully. Moreover, DEMA, when used to calculate other technical indicators, such as MACD, gives earlier signals than the classic MACD. So, advanced forex traders can use DEMA in indicators and trading systems that use classic moving averages and smoothing indicators.
The indicator works well on all intraday price charts as well as daily, weekly and monthly price charts. So, forex traders can use the indicator for scalping, short-term and long-term trading strategies. In addition, traders can download the indicator for free and install it easily.
Generalized Double DEMA Indicator For MT5 Trading Signals
The above EURUSD H1 candlestick chart shows the indicator for MT5 in action. The indicator draws the DEMA line in red.
The direction of the indicator shows the potential direction of the market trend. If the indicator line is pointing up, it indicates a bullish market condition. Similarly, the indicator line pointing down indicates a bearish price trend.
However, the best trading strategy is to trade with the intersection of the slow and fast periods. The intersection of these two instances of the indicator includes the classic crossover trading strategy. But the DEMA crossover gives early trading signals compared to other moving average crossovers and makes trading more profitable.
If the fast DEMA crosses above the slow DEMA, it indicates a bullish crossover. Thus, forex traders should enter a buy position with a stop loss below the previous swing low. The crossover does not provide a profit target, so traders may exit on the opposite trade signal or a good risk/reward ratio.
Similarly, if the fast DEMA crosses below the slow DEMA, it indicates bearish market conditions. Traders should place a sell trade with a stop loss above the previous swing high.
Conclusion
The Generalized Double DEMA indicator for MT5 really responds much better to price movements than classic moving averages. However, since the indicator line is too close to the price, it can be confusing for new forex traders. While the DEMA crossover trading strategy works well, the indicator cannot be used alone. Finally, like any technical indicator, it gives the best results when traded in combination with other technical tools and indicators.
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