Rhythmic Trends Intraday Strategy: Maximizing Profits with the DeMarker Indicator

In the dynamic world of forex trading, having a robust and reliable strategy is essential for consistent success. Among the many technical indicators available to traders, the DeMarker Indicator stands out as a powerful tool for analyzing market turnaround points and generating trading signals.

In this article, we will delve into the specifics of a tactical trading strategy based on the methods of famed trader and technical analysis innovator Tom DeMark. Whether you’re a seasoned trader or just starting your trading journey, this strategy based on the DeMarker indicator will help you to stay ahead in the markets.

The DeMark formula to tackle the day-to-day market

We call this strategy Rhythmic Trends because it is based on just that – trends that are in rhythm. We use DeMark trendlines and the DeMarker oscillator to help us find potential entries. For additional verification, we plot a 21-period and 8-period smoothed moving averages to show us the market's general direction.

This method aims to look for either too low or too high readings on the DeMarker oscillator. Basically, the DeMarker works like many other technical oscillators. It oscillates between 0 and 1, with the 0.3 and 0.7 levels being particularly important. We look for buy setups when the DeMarker indicator is near 0.3 and for sell setups when the DeMarker is near or above 0.7.

For a buy or sell setup to exist, it must be backed up by an existing trendline. In cases of bullish setups, we need a support trendline sloping upwards (or horizontal). In the case of short entries, we need resistance trendlines that are sloping downward. When the price comes close to testing the trendline again, we look for readings indicating extremes on the DeMarker oscillator (either close to 0.3 or 0.7).

A buy or sell signal is generated when the trendline is confirmed. In the case of bullish setups, the price should bounce at the trendline when the DeMarker is around 0.3. For bearish setups, look for a rejection at the trendline and a reading of around 0.7 on the DeMarker oscillator.

Additionally**, the 8 and 21 moving averages should confirm the trade signal.** For buy trades, they should be in a bullish crossover (8 above 21). And for sell trades, the moving averages should be in a bearish crossover (8 below 21, indicating a bearish trend).

Putting the rhythmic trends strategy to work

It’s worth noting that the Rhythmic trends strategy is best suited for markets that are trending in an orderly way. That is, strong trends without any retracements won’t generate many signals with this strategy. On the other hand, orderly trends provide regular retracements of around 38.2% to 50%, allowing many entry points along the way.

Stock indices like S&P 500, DAX, or NASDAQ, as well as major currency pairs (Forex) like EURUSD, AUDUSD, and GBPUSD, are some instruments where orderly trends are common. It’s also best to stick with the daily or lower timeframes when trading this Rhythmic Trends strategy based on the DeMarker indicator.

Indicators used:

    * DeMarker oscillator (turquoise line at the bottom of the chart)

    * 8 smoothed MA (light brown line)

    * 21 smoothed MA (light blue line)