Technical Report: DEMA 100-200 Crossover Strategy

What is DEMA? The Double Exponential Moving Average (DEMA) is designed to reduce lag compared to traditional moving averages. It is calculated as: DEMA = 2 × EMA - EMA(EMA) DEMA reacts faster to price changes, providing earlier signals while still maintaining smoothness, making it ideal for trend-following systems. Purpose of 100-DEMA and 200-DEMA • 100-DEMA represents the medium-term trend. • 200-DEMA shows the long-term trend. Their crossover provides key signals for entering or exiting trades. Bullish Crossover (Golden Cross) Occurs when the 100-DEMA crosses above the 200-DEMA. Implication: • Trend is turning positive. • Indicates potential for a sustained uptrend. Action: • Enter long positions. • Confirm with volume or RSI above 50. Example: A stock at ₹150 shows a bullish crossover with increasing volume. It trends to ₹220 over months. Bearish Crossover (Death Cross) Occurs when the 100-DEMA crosses below the 200-DEMA. Implication: • Trend is weakening. • Signals possible downtrend. Action: • Exit long positions or consider short trades. • Confirm with RSI below 50 or volume spike. Example: A stock at ₹180 shows a bearish crossover and falls to ₹120 in the following months. Strategy Rules 1. Buy when 100-DEMA crosses above 200-DEMA. 2. Sell when 100-DEMA crosses below 200-DEMA. 3. Use volume or RSI as filters. 4. Stop-loss: 5–8% from entry. 5. Use trailing stops or last swing levels for exits. Strengths • Faster signals than SMA/EMA. • Better trend clarity in trending markets. Limitations • Whipsaws in sideways markets. • Requires confirmation to reduce false signals. Application • Effective in trending markets (up or down). • Avoid using during flat or range-bound phases. • Can be implemented in platforms like TradingView, Amibroker, or broker-based charting tools. Conclusion The 100-DEMA and 200-DEMA crossover is a practical method for identifying trend shifts. It works best when supported by volume or momentum indicators and proper risk controls.