Demand Index

What Is Demand Index?

The Demand Index is a complex technical indicator that utilizations price and volume to survey buying and selling pressure influencing a security.

Understanding Demand Index

The Demand Index is a complex technical indicator developed by James Sibbet that uses north of 20 segments of data to measure the proportion of buying pressure to selling pressure. Traders can involve this data as a leading indicator that predicts where a security's price might be going over the close and long-term.

Six Rules For Demand Index

James Sibbet laid out six rules for utilizing Demand Index when the technical indicator was initially distributed. While traders might utilize varieties of these rules, they act as a great baseline for involving the indicator in practice.

The six rules are as follows:

1. A divergence between the Demand Index and price is a bearish indication.
2. Prices frequently rally to new highs following an extreme top in the Demand Index.
3. Higher prices with a low Demand Index frequently demonstrate a top in the market.
4. The Demand Index moving through the zero line recommends a change in trend.
5. The Demand Index staying close to the zero line demonstrates weak price movement that won't keep going long.
6. A long-term divergence between the Demand Index and price predicts a major top or base.

Traders ought to utilize the Demand Index related to other technical indicators and chart examples to augment their chances of progress.

Demand Index Example

Demand Index hits four tops in the initial 9 months of 2018. The security finishes out around fourteen days after the main top in January 2018, giving way to a major decline that drops the indicator into the lower part of the panel simultaneously the decline reaches a conclusion. A subsequent top in March goes before an intermediate top by under seven days. Both indicator and security then lose ground in a pullback that endures into late April. Demand Index floods higher in May, posting a third pinnacle half a month later.

The security keeps on gaining ground for one more month, showing a potential false reversal signal. Nonetheless, Demand Index bobs at the zero line, showing the uptrend has not changed. A fourth top in July makes little difference, with higher prices well into August.

The Bottom Line

The Demand Index is a complex technical indicator that utilizations price and volume to evaluate buying and selling pressure influencing a security. The maker, James Sibbet, recommends six rules while involving the indicator as a starting point for market analysis.