Question 1

What is DEMA?

Accepted Answer

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.

Question 2

How it works

Accepted Answer

``` 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.

Question 3

Key features

Accepted Answer

- **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.

Question 4

Trend direction

Accepted Answer

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

Question 5

Crossovers

Accepted Answer

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

Question 6

Parameters

Accepted Answer

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

Question 7

Example conditions

Accepted Answer

| 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 |

Question 8

DEMA vs Other Moving Averages

Accepted Answer

| 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

Question 9

Trend Following

Accepted Answer

Use DEMA(20) as a dynamic trend filter: - Enter long when `close > DEMA(20)` and RSI 30

Question 10

Mean Reversion

Accepted Answer

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

Question 11

Tips

Accepted Answer

- 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.