Generalized DEMA: Adjusting Moving-Average Speed and Smoothness

Summary

The document explains the double exponential moving average as a way to reduce the lag of a conventional moving average. It describes constructing DEMA from an exponential moving average and a second exponential average applied to the first, then combining the two. The generalized variant makes the final multiplier adjustable through a factor bounded between zero and one.

Increasing that factor makes the indicator respond more quickly, while reducing the smoothness of its slope. Values above one can increase overshoot enough to make the indicator unusable. The page suggests using the line like a regular moving average or treating a color change as a signal, but it supplies no trading rules, market examples, parameter study, or backtest results. Faster response may therefore come with noisier signals, and the document does not establish whether the generalized version improves trading performance.

Key ideas

• DEMA combines an EMA with a second EMA calculated from the first to reduce lag.
• The generalized form lets the user adjust the final multiplier with a factor from zero to one.
• A higher factor makes the indicator faster but its slope less smooth.
• Factors above one can cause excessive overshoot.
• The indicator may be used as an average or through changes in its plotted color.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.