DeMark Trading System
The DeMark Trading System is a popular technical analysis approach used by traders to identify market trends, reversals, and potential entry and exit points. Developed by Tom DeMark, this system relies on mathematical calculations and proprietary indicators to predict price movements with high accuracy.
What is the DeMark Trading System?
The DeMark Trading System is a set of technical indicators designed to assess market conditions and predict potential price reversals. Unlike traditional trend-following indicators, DeMark’s approach focuses on price exhaustion points, where trends are likely to reverse.
This system is widely used in forex, stocks, commodities, and crypto trading, offering traders a structured methodology to identify low-risk trading opportunities.
Key Features of the DeMark Trading System
- Helps identify market trend exhaustion points.
- Provides signals for trend reversals and breakouts.
- Works across different timeframes and asset classes.
- Uses mathematical models to reduce emotional bias in trading.
Key Indicators in the DeMark Trading System
1. TD Sequential Indicator
The TD Sequential is one of the most famous DeMark indicators. It helps traders spot trend exhaustion by counting price bars in a specific sequence.
- Setup Phase: A sequence of 9 consecutive price bars that close higher or lower than four bars earlier.
- Countdown Phase: A follow-up sequence of 13 price bars that confirm trend exhaustion.
- Buy Signal: When the countdown reaches 13, signaling a potential upward reversal.
- Sell Signal: When the countdown reaches 13 in an uptrend, indicating a possible downturn.
2. TD Trendline Indicator
The TD Trendline helps traders identify breakout and breakdown levels. It is drawn based on specific price points and provides support and resistance levels.
- If the price breaks above the TD Trendline, it signals a bullish breakout.
- If the price falls below the TD Trendline, it indicates a bearish breakdown.
Trading Strategy
Accuracy = 52-65% (varies on each asset)
Backtested – for last 10 year data
Take Profit and Stop Loss Ratio 1:2, 1:3
Zoom Call Proof are Available
3. TD Differential Indicator
This indicator is used to measure price momentum by comparing the current price level to previous ones. It helps traders confirm trends and detect potential reversals.
4. TD Range Projection Indicator
The TD Range Projection predicts potential price movements based on historical data, helping traders set realistic stop-loss and take-profit levels.
Trading Strategy
Accuracy = 52-65% (varies on each asset)
Backtested – for last 10 year data
Take Profit and Stop Loss Ratio 1:2, 1:3
Zoom Call Proof are Available
How to Use the DeMark Trading System in Your Strategy
Step 1: Identify Market Trend
Before using DeMark indicators, determine whether the market is in an uptrend, downtrend, or ranging phase. This helps in applying the correct indicators effectively.
Step 2: Use TD Sequential for Trend Reversals
- Look for a completed 9-count setup followed by a 13-count countdown for a potential reversal.
- Enter a trade when the sequence confirms exhaustion and aligns with other technical factors.
Step 3: Confirm with TD Trendlines
- Draw TD Trendlines to establish support and resistance levels.
- If the price breaks above resistance, consider a buy trade.
- If the price falls below support, consider a sell trade.
Step 4: Set Stop-Loss and Take-Profit Targets
- Use the TD Range Projection to determine realistic price targets.
- Set stop-loss levels below support (for long trades) or above resistance (for short trades) to manage risk.
Step 5: Combine with Other Indicators
While the DeMark Trading System is powerful, combining it with other technical tools like moving averages, RSI, and Fibonacci retracements can enhance accuracy.
Advantages and Limitations of the DeMark Trading System
✅ Advantages
✔️ Helps traders identify trend exhaustion points with precision.
✔️ Works across multiple asset classes (stocks, forex, crypto, commodities).
✔️ Provides a structured trading approach with clear rules.
✔️ Reduces emotional trading by relying on quantitative analysis.
⚠️ Limitations
❌ Requires practice and experience to interpret signals accurately.
❌ May produce false signals in highly volatile markets.
❌ Works best when combined with other technical indicators for confirmation.
Conclusion
The DeMark Trading System is a valuable tool for traders looking to identify trend reversals, breakouts, and entry/exit points with mathematical precision. By using key indicators like TD Sequential, TD Trendlines, and TD Range Projection, traders can gain deeper insights into market movements and make more informed trading decisions.