Dual Exponential Moving Averages Explained
The double exponential relocating average (DEMA), revealed in Figure 1, was created by Patrick Mulloy in an attempt to lower the amount of lag time found in standard moving standards. " In other words, the DEMA is not simply 2 EMAs integrated, or a relocating average of a relocating average, but it is an estimation of both dual and solitary EMAs. Technical evaluation devices such as moving typical convergence aberration ( MACD) and three-way exponential moving standard ( TRIX) are based on moving average types as well as can be changed to integrate a DEMA in place of various other extra standard types of relocating averages.
History of the Double Exponential Moving Average
In technical analysis, the term moving average refers to an average of price for a particular trading instrument over a specified time period. For example, a 10-day moving average calculates the average price of a specific instrument over the past 10 days, a 200-day moving average calculates the average price of the last 200 days and so on. Each day, the look-back period advances to base calculations on the last X number of days. A moving average appears as a smooth, curving line that provides a visual representation of the longer-term trend of an instrument. Faster moving averages, with shorter look-back periods, are choppier; slower moving averages, with longer look-back periods, are smoother. Because a moving average is a backward-looking indicator, it is described as lagging.
The double exponential moving average (DEMA), shown in Figure 1, was developed by Patrick Mulloy in an attempt to reduce the amount of lag time found in traditional moving averages. It was first introduced in the February 1994 issue of the magazine Technical Analysis of Stocks & Commodities in Mulloy's article "Smoothing Data with Faster Moving Averages." (For more, see: Technical Analysis Tutorial.)