DEMA (Double Exponential Moving Average)

The Double Exponential Moving Average (DEMA), developed by Patrick Mulloy, is a technical indicator designed to reduce the lag found in traditional moving averages. It combines a single EMA with a double-smoothed EMA to produce a faster, more responsive average.

DEMA(N) = 2 × EMA(N) - EMA(EMA(N))

By subtracting the double-smoothed EMA from twice the single EMA, DEMA cancels out a portion of the inherent lag.

• Reduced lag — reacts faster than both SMA and standard EMA of the same period.
• Smoother than raw price — still provides meaningful noise filtering.
• Drop-in replacement — can replace SMA or EMA in most crossover and trend-following strategies.

Trend direction

• Price above DEMA — uptrend.
• Price below DEMA — downtrend.

Crossovers

• DEMA of short period crossing above DEMA of long period — bullish.
• DEMA of short period crossing below DEMA of long period — bearish.

| Parameter | Default | Description | |-----------|---------|-------------| | Period | 20 | Lookback length |

| Condition | Meaning | |-----------|---------| | close > DEMA(20) | Price above the 20-period DEMA | | DEMA(10) cross_over DEMA(30) | Fast DEMA crosses above slow — bullish | | close cross_under DEMA(50) | Price drops below DEMA — bearish signal |

| Moving Average | Lag | Smoothness | Best For | |---------------|-----|-----------|----------| | SMA | High | High | Long-term trend identification | | EMA | Medium | Medium | General-purpose trend following | | DEMA | Low | Medium | Fast markets, intraday trading | | TEMA | Very low | Lower | Scalping, very short-term | | ALMA | Tunable | High | Custom lag/smooth balance |

DEMA sits in a sweet spot between EMA and TEMA — fast enough to catch early moves, smooth enough to avoid excessive noise.

Trend Following

Use DEMA(20) as a dynamic trend filter:

• Enter long when close > DEMA(20) and RSI < 70
• Enter short when close < DEMA(20) and RSI > 30

Mean Reversion

Use DEMA as a magnet for price:

• When price deviates significantly from DEMA, expect a pullback toward the average
• Combine with Bollinger Bands: enter when price touches outer band and DEMA slope is flat

• DEMA is excellent for fast-moving markets (crypto, scalping).
• Because of lower lag, DEMA generates earlier signals — confirm with volume or momentum oscillators.
• On higher timeframes (daily, weekly) DEMA behaves similarly to EMA; the benefit is most noticeable on intraday charts.
• Compare DEMA, TEMA, and ALMA to find the best lag/smoothness trade-off for your strategy.