The moving averages are dependent on the final data point. The black line shows the 50-day DEMA, separated from the stock prices, compared to the green line, which represents the 9-day DEMA. Let us examine the discrepancies when the number of days for the DEMA is changed: A shift in volatility is a good indicator of a trend reversal and stock transactions. Since the DEMA line shows stock prices closely, it is the most exposed to stock volatility. We notice that DEMA is near the price points, with little deviations. The red line presents the Exponential Moving Average (EMA), the yellow line represents the Simple Moving Average (SMA) line, and the green line depicts the DEMA. ![]() The chart includes candlesticks, which reflect Apple Inc.'s stock price variation for each interval. over nine months, from Apr 2020 to November 2020. Let us look at the price variations of Apple Inc. Similarly, there is another known measure, triple EMA, which uses the EMA of the EMA of the EMA. How to calculate Double Exponential Moving Average?ĭEMA's name depicts that it uses an EMA of the EMA, not 2*EMA. This combination reduces the lag in the DEMA. Patrick Mulloy introduced the moving average variation in a 1994 article titled "Smoothing Data with Faster Moving Averages."ĭEMA is a combination of smoothed EMA and a basic EMA. The DEMA uses two EMAs to reduce lag in the price charts. The double in Double exponential moving average means two EMAs. Uptrend: When the price gets higher than its average price.ĭowntrend: When the price gets lower than its average price. The DEMA tracking helps traders to analyze the uptrend and downtrend of the stocks. Like other moving averages, DEMA is also used to indicate the trends in the cost of assets or stock. Technical traders use DEMA to decrease "noise" that can disturb the movements on the price chart. It helps traders in analyzing trend reversals quickly. It is an indicator designed to reduce the lag in the results generated by the moving average. The DEMA stands for Double Exponential Moving Average.
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