The indicator is a market-timing oscillator that attempts to overcome problems with exponentially calculated oscillators, such as the MACD, by being arithmetically calculated.
The indicator usually produces values in range of -100/+100. A value +45 or higher indicates overbought conditions and a value -45 or lower indicates oversold conditions. DeMark recommends trading in extreme overbought or oversold conditions indicated by six or more bars above/below the OB/OS level.
Note: As for many other indicators the Internet is filled by dozen variations of the indicator formula. I chosen the VTTrader's implementation of the indicator as a basis for our indicator. The VTTrader formula is:
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HighMom:= H - Ref(H,-2);
LowMom:= L - Ref(L,-2);
TD1:= (H>=Ref(L,-5) OR H>=Ref(L,-6));
TD2:= (Ref(H,-2)>=Ref(C,-7) OR Ref(H,-2)>=Ref(C,-8));
TD3:= (L<=Ref(H,-5) OR L<=Ref(H,-6));
TD4:= (Ref(L,-2)<=Ref(C,-7) OR Ref(L,-2)<=Ref(C,-8));
TD5:= (TD1 OR TD2) AND (TD3 OR TD4);
TD6:= If(TD5,HighMom + LowMom,0);
TD7:= Abs(HighMom) + Abs(LowMom);
TDREI:= 100 * Sum(TD6,Periods) / Sum(TD7,Periods);
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The indicator was revised and updated
