Double exponential moving average

What the numbers mean

The period means the same as any EMA lookback; the construction is what differs. DEMA takes an EMA, then an EMA of that EMA, and subtracts the difference to cancel much of the lag — so a 21-period DEMA hugs price far more closely than a 21-period EMA.

• 21 — common default; tracks price about as closely as a much shorter EMA
• 9 or 10 — fast trading line
• 50 or 200 — used when a long average is wanted without the usual delay

How it is used

Chosen when a trader wants the smoothing of a long average without waiting as long for it to turn, typically for trailing a position or for faster crossover pairs.

• Trailing a position in a fast trend, where a plain EMA gives back too much
• As the fast line against a conventional EMA or SMA

How it relates to everything else

DEMA, TEMA and HMA all solve the same problem — lag — by different arithmetic, and they line up in a predictable order. At the same period, EMA is slowest, DEMA faster, TEMA faster still, with HMA in the same neighbourhood as TEMA but smoother. The faster the construction, the more false turns it produces in a range.

• EMA → DEMA → TEMA is the order from most lag to least at equal periods
• A DEMA/EMA pair at the same period is itself a crossover system
• Use ADX or a longer average to filter its signals in sideways markets

What to watch for

Lag reduction is not free: DEMA overshoots at turning points and produces more false crosses in choppy conditions than a plain EMA.