Demand Index combines price and volume in a special way, so it often serves as a leading indicator of price changes. The Demand index was developed by James Sibbet.
James Sibbet formulated six rules for interpreting the demand index:
- A divergence between the demand index andprices signals an upcoming price reversal.
- Extremely high values of the demand indexoften precede the formation of new price highs (the index is a leadingindicator).
- The combination of a new price high with alower peak of the demand index usually falls on an important price peak(the index is a synchronous indicator).
- Crossing of the zero level by the demandindex usually occurs after a price trend reversal and serves as itsconfirmation (the index is a confirming indicator).
- If the demand index constantly fluctuatesaround zero, the current price trend has weak potential and will not lastlong.
- A significant long-term divergence betweenprices and the demand index indicates an important market top or bottom.
The indicator view in the chart.
The indicator has the following parameters:
Period
Buy/Sell Power - setting of the volume values calculation period.
Smooth
Buy/Sell Power - setting of the volume values smoothing period.
Moving Average - setting of the indicator values smoothing period.
Drawing
Panel - selection of the indicator location in the chart:
- New panel
- Chart
Indicator, Moving average
Show value - display of the indicator value on the price scale.
Show zero values - display of zero values.
Scale/Auto-scaling - if this option is on, the scale will be automatically calculated, based on the minimum and maximum indicator values, so that the indicator would fit in the chart.
Color
Visual type - visual setting of the indicator display in the chart:
- Line
- Histogram
- Hash
- Block
- Cross
- Square
- Dots
- Up arrow
- Down arrow
- Axis label
- Hide
Line style - setting of the line display style:
- Dot
- Solid
- Dash
- Dash - dot
- Dash - dot - dot
Width - setting of the indicator line width.
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