The DEMA indicator (Double Exponential Moving Average) was developed by Patrick Mulloy and published in February 1994 in the “Technical Analysis of Stocks & Commodities” magazine. Mr. Mulloy describes the DEMA moving average as “not just a double EMA with twice the lag time of a single EMA, but is a composite implementation of single and double EMAs producing another EMA with less lag than either of the original two.” The formula is largely based on the Exponential Moving Average (EMA) and can be defined as the following: “2 * EMA(Period) – EMA(EMA(Period), Period),” where Period is adjustable by the user (example 8). To clarify the term “EMA(EMA(Period), Period),” it simply means to take the EMA of another EMA, where both EMAs use the same Period. The DEMA attempts to remove the lag inherent in most moving averages by placing more weight on recent inputs / price.
As with all of our moving averages, the DEMA is built on our Moving Average Framework, which allows users to easily run the indicator on multiple time frames (MTF), including custom bar types. To preview “The Framework” that makes our indicators a necessary part of every traders arsenal, please review the following video: