Double Exponential Moving Average (DEMA)

Parameters: period = 20 (5–200)

Overview

The Double Exponential Moving Average (DEMA), developed by Patrick Mulloy and introduced in the January 1994 issue of Technical Analysis of Stocks & Commodities magazine, revolutionized moving average technology by addressing the inherent lag problem. As Mulloy explained, DEMA is not simply a double EMA but "a composite implementation of single and double EMAs producing another EMA with less lag than either of the original two," effectively eliminating most of the lag seen in traditional moving averages.

What makes DEMA invaluable for 2025 trading is its unique ability to provide clearer buy and sell signals compared to traditional techniques, allowing for better entry and exit points. The indicator responds very quickly to recent prices while maintaining smoothing benefits, making it especially valuable for day traders and swing traders who need timely signals in fast-moving markets. By getting into trends significantly earlier than standard MA crossovers, traders typically achieve higher profits with DEMA strategies.

Interpretation & Trading Signals

DEMA Crossover Strategy:

  • Popular Periods: 5/10, 9/18, 10/20, and 50/200 DEMA combinations
  • Buy Signal: Fast DEMA crosses above slow DEMA - enter long positions
  • Sell Signal: Fast DEMA crosses below slow DEMA - exit or short
  • Early Entry Advantage: Provides signals earlier than standard MA crossovers

Price-DEMA Interaction (2025):

  • Bullish Crossover: Price crosses above DEMA - trend reversal to upside
  • Bearish Crossover: Price crosses below DEMA - trend reversal to downside
  • Dynamic Support: Rising DEMA acts as support during pullbacks
  • Dynamic Resistance: Falling DEMA acts as resistance during rallies

Best Practices & Limitations:

  • Market Conditions: Works best in strong trending markets, avoid ranging conditions
  • Confirmation: Combine with RSI, MACD, or volume indicators for validation
  • Trader Type: Most effective for day traders and swing traders vs long-term investors
  • Risk Management: Use stops below DEMA support in uptrends, above resistance in downtrends

Example Usage

Code examples will be available once the Rust implementation is complete.

Performance Analysis

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