Trading Price Divergence with the DeMarker Indicator

Summary

This short note describes using the DeMarker indicator to identify divergences between price and momentum. The author’s method waits for a divergence to form, then uses the indicator’s move through the intervening swing level as confirmation: a cross above the peak between two troughs triggers a long entry, while the reverse setup is proposed for shorts. The included indicator specification uses a 14-period calculation based on changes in highs and lows, with reference levels at 20 and 80.

The author claims DeMarker can signal divergences more effectively than RSI, but provides no comparative evidence, chart examples, backtest, or performance statistics. The entry rule is stated at a high level and leaves execution details, exits, position sizing, and risk controls unspecified. As presented, it is a technical-indicator idea that would need independent testing across instruments and market conditions before its reliability could be assessed.

Key ideas

• The note uses DeMarker to look for divergence between price action and indicator movement.
• A long entry is considered after the indicator crosses the level between two troughs following bullish divergence.
• The reverse divergence and crossing pattern is proposed for short entries.
• The specified calculation uses a 14-period lookback and reference levels of 20 and 80.
• The claim of superiority to RSI is unsupported by comparative tests or reported results.

Tags

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