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Double Exponential Moving Average (DEMA)

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Introduction

DEMA is a calculation based on both a single exponential moving average (EMA) and a double EMA. It was developed by Patrick Mulloy.

The DEMA is a fast-acting moving average that is more responsive to market changes than a traditional moving average. It was developed to eliminate some of the lag in simple moving average. The DEMA can be incorporated with other indicators whose logic is based simple moving average.

Formula

D-EMA = 2*EMA – EMA(EMA)
Where: 
EMA = EMA(1) + α * (Close – EMA(1)) 
α = 2 / (N + 1) 
N = Smoothing period.

Advantage

DEMA can be used instead of traditional moving averages or the formula can be applied to smooth out price data for other indicators, which are based on moving averages. DEMA can help to spot price reversals faster, compared to the regular EMA.

Sample Calculation

Technical chart for DEMA

Technical Indicators

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