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)
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 itĂ‚Â 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 Sequentialâ„¢ and the TD Range Expansionâ„¢.
Shameless Plug: If the book appears worthy of being added toĂ‚Â 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.
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.
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?
they are for sale for blocks
http://novicebear.com/blocks-code/
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.
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.
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.
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.
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.
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).
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.
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/
Perhaps I can be of some help. This website simplifies DeMark
http://www.researchlabtrading.com/public/382.cfm
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
Thank you Ivan!
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
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
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.