Trading with the 23-period and 12-period Weighted Moving Averages (WMAs) combined with the DeMarker indicator provides a structured approach to identifying both trend direction and potential reversal points.
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The 12 WMA, being more sensitive to recent price changes, reacts faster to market movements, while the 23 WMA offers a smoother view of the medium-term trend. A bullish signal is often confirmed when the 12 WMA crosses above the 23 WMA, indicating upward momentum. Conversely, a bearish crossover—when the 12 WMA falls below the 23 WMA—can signal potential downside movement. These crossovers help traders pinpoint entry and exit zones based on trend shifts.
The DeMarker indicator adds a momentum perspective to this setup. By analyzing the highs and lows of recent price bars in relation to previous bars, it determines buying or selling pressure. A DeMarker value above 0.7 suggests overbought conditions, while a reading below 0.3 implies oversold territory. When the WMAs indicate a new trend but the DeMarker is in an extreme zone, it signals caution. For example, a bullish crossover with the DeMarker in overbought territory may suggest the move is overextended, and waiting for a pullback could be wise. On the other hand, a bullish crossover with a DeMarker rising from an oversold level could confirm a strong reversal with room to run.
By combining the 12 and 23 WMAs with the DeMarker indicator, traders can better filter their trades to improve accuracy. A practical strategy could involve entering long trades when the 12 WMA crosses above the 23 WMA and the DeMarker rises from below 0.3, confirming both trend alignment and positive momentum. For short trades, the 12 WMA crossing below the 23 WMA with the DeMarker falling from above 0.7 can provide confirmation of weakening price action. This confluence of trend and momentum data helps traders avoid premature entries and enhances decision-making in both trending and ranging markets.
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Risk Disclaimer: Trading options involves financial risk and may not be appropriate for all investors. The information presented here is for information and educational purposes only and should not be considered an offer or solicitation to buy or sell any financial instrument. Any trading decisions that you make are solely your responsibility. Past performance is not necessarily indicative of future results.
