iBankCoin
Joined Nov 11, 2007
1,458 Blog Posts

The DeMark Indicators

I have read a fair amount about Tom DeMark and his indicators. The indicators are very popular, but have been somewhat hard to quantify, and therefore have had an aura of mystery surrounding them. For a very good primer on the man and his methods, this article will be very helpful: Impressive Signals from DeMark.

The recent (2008) publication of Jason Perl’s DeMark Indicators (Bloomberg Market Essentials: Technical Analysis) is exciting as Perl is fairly successful at describing the indicators in a way that allows them to be quantified. While I have not read DeMark’s books, I understand that Perl describes DeMark’s indicators better than DeMark himself.

I purchased Perl’s book a few weeks ago. While he makes every effort to clearly describe the TD setups, the content is somewhat confusing. I have not made it past the first 20 pages, and I have to keep re-reading those pages over and over. My first impression is that these indicators and setups are over-optimized and curve-fitted. Keep in mind, that is simply a first impression.

I have the rudiments of the TD Sequential Buy and Sell Setups coded, and have run some preliminary proof-of-concept type backtesting in Stockfetcher on these. So far, the results are poor. Granted, I do not yet have a thorough understanding of these indicators, and I know that finding stocks meeting the TD Setup criteria is only the first step of a multi-step process necessary to trade these strategies and indicators as they were designed.

I am curious if there is anyone out there who is trading with these indicators and strategies. I would like to hear what indicators traders are finding to be successful.

For those who are unfamiliar with DeMark, below is a screenshot showing the TD Sequential and the TD Range Expansion.

Shameless Plug: If the book appears worthy of being added to your trader’s library, please use the link to Amazon that I provided to purchase the book. I will get a very very small kickback from Amazon for the referral.

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23 comments

  1. The Chart Addict

    I’m still learning the indicators. People think it’s the holy grail and shit. Oh, and SAC owns DeMark, at least for his time.

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  2. Woodshedder

    TCA, I can not find ANY Tradestation Code for these. It is like all evidence of it has been wiped from the interwebs. Guess SAC owns it all now.

    The TD Seq. Buy and Sell setup test horribly, on their own. Is it the step after the setup that makes some huge difference?

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  3. Danny

    they are for sale for blocks

    http://novicebear.com/blocks-code/

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  4. Sia

    I do not think Demark is really worth much. It showed some value in detecting intraday changes in trends (I only used demark sequential). Click on my name to see my blog post on it. But when I viewed the action on a daily chart it seemed to be very bad. TOS has demark sequential and countdown coded as an indicator.

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  5. The Chart Addict

    SAC pays DeMark quite a bit for an indicator that’s not on the market.

    His indicators won’t be available floating around for free. I think the code costs like $300-$500. Once the set up is perfected, the “Countdown” can begin. Those 13 consecutive closes for both the buy (>/= 2H price bars)/sell (</= 2L price bars) creates the low-risk entry. The setup is just the setup.

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  6. Damian

    I’ve spent some time on Demark – looks great on screen, but in testing it sucked ass. My conclusion is that it isn’t worth the time. But hey, I’ve been wrong about many things before.

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  7. RipeTrade

    Wood,
    After the #13 sell or buy signal you need to wait for what is called a “flip” basically just a close below the close or low from 4 days prior, like a pivot. Also I have found that the signals work much better when using a fundamental setup in conjunction to TD, ie COT , sentiment, P/B, P/S, etc. Check out TD buys in the S&P 10min bars when the VIX is also giving a TD sell signal in the 10min bar chart.

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  8. Tendollar tommy

    I never had much luck with his famous Sequential but do find the way he draws trendlines to be rational. Also, retracement levels and Support/ Resistance indicators work pretty well. But let’s remember, he came up with this stuff in the 70’s in an environment where computers were almost non-existent. Having been known and used for so long has probably diminshed the usefulness, to say nothing of the fact that markets evolve and using analysis, techniques and indicators from the past or over long periods of time is not going to work. The biggest factor in profitable trading remains money management.

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  9. jkw

    It would be hard to have a worse description of his indicators than the ones he writes in his books. I read some of those descriptions 3 or 4 times before giving up on understanding what he was trying to do. For some reason he seems to be unwilling to putting equations in, so he describes all the math with words. He also describes the long and short setups simultaneously with lots of parenthetical remarks indicating which way is long and which way is short. And his indicators tend to have a lot of conditional statements, with no paragraph breaks to show the flow of logic. The resulting gibberish is barely readable. His indicators are too complicated to be described any way other than pseudocode (or actual code).

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  10. Woodshedder

    Excellent comments folks, thanks! I will update with later posts as I make my way through the book. I will keep testing things, as long as I can get the code for them.

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  11. haywoodjablome

    i’ve been following Stephen Vita at Alchemy of Trading. He is a huge follower of Demark, and Paul Tudor Jones. I love his site, and pay him monthly as well. he also has great market comments, and is more of a position/swing trader.
    http://stephenvita.typepad.com/alchemy/

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  12. Dave M.

    Perhaps I can be of some help. This website simplifies DeMark

    http://www.researchlabtrading.com/public/382.cfm

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  13. Ivan G

    I programmed TD setup, TD sequential, and TD Combo for ninjatrader platform. Link is below, source is free. Good luck.

    http://www.ninjatrader-support2.com/vb/local_links_search.php?action=show&literal=1&search=demark&desc=1

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  14. Woodshedder

    Thank you Ivan!

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  15. SnoopyJC

    They discuss this indicator in The Disciplined Investor Podcast this week: http://www.thedisciplinedinvestor.com/blog/2009/06/01/tdi-podcast-111-kevin-depew-on-technical-indicators/

    FYI,
    –joe

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  16. Mike@sg

    For me, i think the best best entry for sell is when the price hit the upper line &
    the best entry for sell is when price hit the bottom line.

    The scenario for profit RISK:REWARD is great, if lets say price move to the opposite line from bouncing you make a profit even great if it break and goes futher to the opposite line.

    For the RISK, if you buy from the bottom line and by chance if it confirms a break you will take minimum losses.

    This is the way to use the TDlines from my experience.

    Thank you
    Mikeshary

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  17. Mike Caron

    I just bought the book by Perl, starting to delog the pseudo-code in anticipation of checking the validity of this strategy. Any feedback? What markets did you try it on, if any, and what time frames? Did you do multiple time frames?

    I just found this thread and may try downloading NinjaTrader and the code and dump out some data from either NeuroShell or Wealth-Lab to test it out. That seems like the quickest way to get started. Appreciate your thoughts.

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    • Woodshedder

      Mike, I never even finished reading the book. The whole affair started to feel very much like curve-fitting.

      I coded the initial TD sequential, but that was as far as I got, and I never tested it in depth.

      Please keep us updated. If you find you want to publish something that you uncover, you can always sign up for free for our Peanut Gallery where you can blog to your heart’s content.

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  18. Vassko

    I “keep an eye on” the TD Sequential, TD Combo and some aspects of the TD D-wave. The methods are fool proof by no means, and as with most indicators require a discretionary feel as well as the implementation of other tools.

    Demark has developed several other methods which are used exclusively at SAC, which incorporate significant usage of fibonacci ratios to the internal structure.

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  19. Robert C

    Thanks everybody. I was about to buy the book, but now I decide to leave my money in bank CDs.

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  20. bigboss

    I’ve been successfully using his indicators on Bloomberg for many years now and have found them to be extremely profitable. Now any indicator can work for anyone and the key is just learning the market and strengths/weakness of each but I feel like they are the best trend exhaustion indicators around. One key is to wait until multiple time frames all line up, then when you see trend reversal indicators on the daily, weekly and monthly charts all at TD resistance points I’ve found very high prob of success on these trades. His books do read like freakin greek or something but if you can decipher his code like language they make very good logical sense. I’ve often wondered if the FLY and the PPT don’t have some of his stuff built in as I’ve seen them both buy too many times at the same time TD sequent is flashing buy signals.

    I haven’t done a ton of backtesting but mostly have just been using it in practice and in mock trading accounts now for quite awhile so maybe someone with more software background can share backtesting results.

    I really like that TD is pretty cut and dry, much less interpretation like so many other tea leaf readers.

    The fact that it’s been around for awhile I think is not relevant. So has swing trading, moving averages as well as value investing and all of them done well still work quite well.

    Also, he has many indicators but if you listen to him talk about his own trading he pretty much just uses td prop, combo, sequent and camo. He obviously looks at many others but you can do very well with just those basics.

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  21. David

    I’ve posted a chart of Demark trading rules for TD Setups and TD Sequential here:

    http://www.healthywealthywiseproject.com/Home/tom-demark/demarktradingrulesfortdsetuptdsequential

    These are based on my review of Jason Perl’s book. Perl pretty much lays everything out, but I did have to read the chapter multiple times.

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  22. chris

    If they worked, they would trade them not sell them. If you came up with some great indicator that consistently made profits, would you sell it or trade it?
    Simple, don’t fall for “holy grails” build your own methodology.

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