Technical Indicators
Double Exponential Moving Average
The Double Exponential Moving Average Indicator (or DEMA) is an original price smoothing indicator developed by Patrick Mulloy and published in February 1994 in the magazine Technical Analysis of Stocks & Commodities.
As P. Mulloy explains in that magazine, classical Moving Averages have the
disadvantage of a reactivity lag that grows with the chosen period.
His solution is a modified version of smoothing with the "Exponential Moving Average" that significantly
improves reactivity to price changes.
DEMA is an acronym for Double Exponential Moving Average. However, the name of this smoothing method can be confusing because it is not just a Moving Average of a Moving Average. In reality, it is the combination of a simple and a double Exponential Moving Average that achieves this result.
Calculation Method
DEMA = 2 * EMA(close, P) - EMA(EMA(close, P), P)
where:
- P: the period
- EMA(close, P): the Exponential Moving Average of closing prices over period P
- EMA(EMA(close, P), P): the Exponential Moving Average of the previous Moving Average over the period P
Example
