DEMA Strategy with MACD

The DEMA Strategy with MACD indicator combines the responsiveness of the Double Exponential Moving Average with the trend confirmation of the MACD to provide a comprehensive trend-following strategy.

Usage

The Usage section focuses on identifying trend reversals and entries based on price interactions with the DEMA line. A long signal is generated when the price closes above the DEMA, while a short signal is triggered when the price closes below it.

Users can enhance signal quality by enabling the MACD confirmation setting. When active, a long entry will only trigger if the price is above the DEMA and the MACD histogram is positive, ensuring that the trend has sufficient momentum. The indicator also includes visual feedback by coloring bars green for bullish conditions and red for bearish conditions.

Details

The Double Exponential Moving Average (DEMA) was developed by Patrick G. Mulloy to reduce the lag found in traditional moving averages. Unlike a standard EMA, the DEMA uses a specific calculation: $2 \times EMA - EMA(EMA)$. This method places greater weight on recent price action, making it more reactive to sudden market shifts.

By pairing this fast-reacting average with the MACD (Moving Average Convergence Divergence) histogram, the strategy filters out "noisy" signals that might occur in sideways markets, requiring both price position and momentum to align before suggesting an entry.

Settings

Main Settings

• DEMA Length: Sets the lookback period for the Double Exponential Moving Average calculation.
• Control 'MACD Histogram is positive?' when Buy condition: When enabled, the strategy requires the MACD histogram to be above zero for a long entry to be valid.

Backtest Timeframe

• From Month/Day/Year: Defines the start date for the strategy backtest period.
• To Month/Day/Year: Defines the end date for the strategy backtest period.

FAQ

How do I use the MACD filter?

You can toggle the MACD filter in the settings menu. When enabled, it adds a layer of confirmation by ensuring momentum is positive before a long trade is executed.

What makes DEMA different from a standard EMA?

DEMA is designed to eliminate lag. It calculates the difference between a single EMA and a double-smoothed EMA to stay closer to the current price action than a standard exponential average.

How can I access the DEMA Strategy with MACD?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.