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Demand Index

by Brian Brown, 3403 days ago
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The Demand Index is a technical indicator that tries to lead price changes using price and volume data. The indicator was developed by Hames Sibbet.

The demand index formula requires several parameters:
Price: A time series that is usually set to the close price, midpoint or high plus low divided by two.
Constant: A constant value. The default value is 5.
Periods: Lookback period used to calculate simple and exponential moving averages within the formula.
HighLowBars: The number of trading bars used to calculate the highest high value and lowest low value.

Demand Index Calculation:
The formula first calculates the buying and selling pressure then the Demand Index. The returned values vary between 100 and -100.
You can display the demand index formula by first downloading it from this page, select "Tools -> Create Functions" in QuantShare trading software then selecting the function from the list.

Example:
di = DemandIndex(close, 5, 19, 2);
Plot(di, "Demand Index Indicator", colorRed, ChartLine);

The Demand Index indicator is interpreted as follow:
- A top is signaled when the price makes new highs and the Demand Index makes a new low.
- The demand index indicator is performing as a leading indicator when it reaches an extreme peak. This situation is often preceded by prices rally to new highs.
- A crossover of the Demand Index above or below the zero line signals a change in trend.
- A weak price movement is signaled when the Demand Index stays near the zero level for a long period.
- A weakness in price is signaled when a divergence occurs between the stock price and the Demand Index.
- A long term divergence between the stock price and the Demand Index is a sign that prices have reached a major top or a major bottom.

Example: Leading indicator
di = DemandIndex(close, 5, 19, 2);
buy = (di == hhv(di, 250));
// Enter a buy order when the Demand index reaches an extreme peak




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Type: Trading Indicator

Object ID: 586


Country:
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Style:
Technical Analysis

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