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Jose,
The basic (Demark) method is
identical to the Stochastic concept:
The Stochastic would be written
as:
(sum( C - llv(L,14), 5 ) /
sum(hhv(14,5) - llv(L,14), 5) ) * 100
which (for the benefit of some
newbies) is taking the absolutely high/low value over the specified
periods.
Whereas, this particular method,
takes the differences of the highs/lows. It would work fine, under normal
circumstances, but fails miserably when there is a single spike either in the
highs or lows.
In other words, let us assume a
"freak" trade where the open is 10 percent higher than yesterday's close, and
then the stock would find its own level, near the previous close. On the chart,
the candle would show as a huge bearish engulfing candle, whereas, in actual
trading, it may not be the case. The Demark Osc then shows the technical picture
"incorrectly" for the chosen periods.
Further, we know, divergences are
notoriously deceptive in the Stochastic Oscillator. This Oscillator stands up
more reliably on divergences.
That is all I remember of it, when
I first studied it. I hope I have made myself adequately clear.
Dusant
----- Original Message -----
Sent: Saturday, April 09, 2005 4:58
PM
Subject: Re: [EquisMetaStock Group] Tom
Demark's 1
Dusant,
your formula plots the same as mine (Lookback periods = 1, SMA
periods =
14), so chances are that it is correct.
http://finance.groups.yahoo.com/group/equismetastock/message/17084
All
we need know is for someone to explain how to apply it to the
markets.
jose '-)
http://www.metastocktools.com
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