Personal Notes on Demark Patterns

by Emmanuel Nyemera, PhD

Buy Patterns Sell Patterns

TD Buy Setup TD Sell Setup
Duration A series of 9 or more consecutive price bars with Duration A series of 9 or more consecutive price bars with each one
each one having a close less than the close 4 price having a close greater than the close 4 price bars earlier.
bars earlier. Nine bars is the minimum for a Setup. Nine bars is the minimum for a Setup.

TDST Support The lowest true low of the last completed TD Sell TDST The highest true high of the last completed TD Buy Setup.
Setup. For any trading bar, its true low is defined Resistance For any trading bar, its true high is defined as the
as the lower of either that bar's low or its higher of either that bar's high or its previous bar's
previous bar's close. close.
The low of bars 8 or 9 of the TD Buy Setup or the The high of bars 8 or 9 of the TD Sell Setup or the high of a
Perfection low of a subsequent trading bar must be less than Perfection subsequent trading bar must be greater than or equal to
or equal to the lows of bars 6 and 7 of the TD Buy the highs of bars 6 and 7 of the TD Sell Setup
Setup
- None of the bars within the TD Buy Setup - None of the bars within the TD Sell Setup has
has closed below TDST Support closed above TDST Resistance
Prerequisites - Oscillators are in oversold zones. - Oscillators are in overbought zones.
before Trading
Trading
Entry 1. If the close of the TD Buy Setup bar 9 is in Entry 1. If the close of the TD Sell Setup bar 9 is in close
Techniques : close proximity (around 23.6%) to TDST Techniques proximity (around 23.6%) to TDST Resistance and
Support and the close of TD Buy Setup bar the close of TD Sell Setup bar 9 is higher than the
9 is lower than the close of TD Buy Setup close of TD Sell Setup bar 8, sell on the close of TD
bar 8, buy on the close of TD Buy Setup 9. Sell Setup 9.
2. In other situations : 2. In other situations :
a. Buy on the reversal bar, the signal bar, a. Sell on the reversal bar, the signal bar, the
the snap-back bar or the reversal snap-back bar or the reversal confirmation bar.
confirmation bar. b. Trail a sell-stop to go short 5 pips + the pip
b. Trail a buy-stop to go long 5 pips + the spread below the 1BL following the
pip spread above the 1BH following Stochastics’ bearish reversal.
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

the Stochastics’ bullish reversal.

c. Trail a buy-stop to go long above the
high of the Bar satisfying the Bishop c. Trail a sell-stop to go short below the low of
rule (ADX). ADX readings of over 40, the bar satisfying the Bishop rule (ADX). ADX
and particularly over 60, have an readings of over 40, and particularly over 60,
excellent record of excellent buying have an excellent record of excellent selling
opportunities. opportunities.
d. Evaluate the lower time frames for TD
Sequential, TD Combo, or qualified TD d. Evaluate the lower time frames for TD
Lines breakouts. Sequential, TD Combo, or qualified TD Lines
e. Entry on the prior swing high violation breakouts .
and the crossing of the 5-day EMA e. Entry on the prior swing low violation and the
above the 13-day EMA on daily charts, crossing of the 5-day EMA below the 13-day
or the crossing of the 8-bar EMA above EMA on daily charts, or the crossing of the 8-
the 34-bar EMA on intraday charts. bar EMA below the 34-bar EMA on intraday
charts.
Identify the TD Buy Setup bar with the lowest true Identify the TD Sell Setup bar with the highest true high
Stop Loss low and subtract the true range of that bar from its Stop Loss and add the true range of that bar to its true high.
true low.

Expected The expectation would be for a return toward the Expected The expectation would be for a return toward the low
Profit Target high range extreme of the current TD Buy Setup, Profit range extreme of the current TD Sell Setup, i.e. TDST
i.e. TDST Resistance. Buy if the expected return >= Target Support. Sell if the expected return >= 2*Capital Exposure
2*Capital Exposure (Risk) (Risk)

Single in/Scale out Money Management System Single in/Scale out Money Management System and the
and the Bishop Rule. Always enter with at least 2 Bishop Rule. Always enter with at least 2 units; one unit is
Trailing Stop units, one unit is to be exited when profit=risk. Trailing to be exited when profit = risk.
and Exit Stop and
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

Strategy Trail stop using the Swing high violation and Exit Trail stop using the Swing low violation and oscillator
oscillator reversal strategy: An oscillator bullish Strategy reversal strategy : An oscillator bearish reversal and a
reversal and a swing high must be taken out swing low must be taken out before the stop los is
before the stop los is adjusted. It doesn’t matter adjusted. It doesn’t matter which event occurs first but
which event occurs first but they must both occur. they must both occur.

Intersection Intersection
Intersection requires that the high of trading bar Intersection requires that the low of bar 8 of the Sell
Applicable to 8 of the Buy Setup, or of the first subsequent bar Applicable Setup, or of the first subsequent trading bar thereafter, be
stocks only thereafter, be greater than or equal to the low to stocks less than or equal to the high three or more trading bars
three or more trading bars earlier, up to and only earlier, up to and the first bar of the Sell Setup. For
including the first bar of the TD Buy Setup. For intersection to be fulfilled, the low of bar 8 of a sell setup
intersection to be fulfilled, the high of bar 8 of a must be lower than or equal to the high of bars 5, 4, 3, 2 or 1
buy setup must be greater than or equal to the low of the sell setup. If this requirement is not met, then the low
of bars 5, 4, 3, 2 or 1 of the buy setup. If this of bar 9 of the sell setup must be lower than or equal to the
requirement is not met, then the high of bar 9 of high of sell setup bar 6 or any other price bar back to bar 1 of
the buy setup must be greater than or equal to the the sell setup. If this is not fulfilled, then each successive price
low of buy setup bar 6 or any other price bar back bar is compared until its low is lower than or equal to the high
to bar 1 of the buy setup. If this is not fulfilled, then of the price bar three or more price bars earlier back to bar 1
each successive price bar is compared until its high of the sell setup. If intersection occurs on price Setup bar 8
is greater than or equal to the low of the price bar or 9, then the sell Countdown begins on the 9 bar. If the
three or more price bars earlier back to bar 1 of the intersection occurs after the completion of the sell Setup
buy setup. If intersection occurs on price Setup phase, then the sell Countdown can start on that bar.
bar 8 or 9, then the buy Countdown begins on
the 9 bar. If the intersection occurs after the
completion of the buy Setup, then the buy
Countdown can start at that bar.

Conventional TD Sequential Buy Countdown Conventional TD Sequential Sell Countdown

 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

Beginning Bar 9 of the Buy Setup Beginning Bar 9 of the Sell Setup
13 price bars. To qualify as a Buy Countdown 13 price bars. To qualify as a Sell Countdown bar, the bar
bar, the bar must have a CLOSE <= LOW two must have a CLOSE >= HIGH two trading bars earlier. For
Count trading bars earlier. For very short time frames, Count very short time frames, the bar must have a CLOSE > HIGH
the bar must have a CLOSE < LOW two trading two trading bars earlier.
bars earlier.

1. Price rallies and posts a true low above 1. Price declines and posts a true high below TDST
TDST Resistance Support

2. Reverse Setup. Price rallies and 2. Reverse Setup. Price declines and generates a Buy
generates a Sell Setup before the Setup before the completion of the TD Sell
completion of the TD Buy Countdown. Countdown.

Cancellation 3. Any new Buy Setup whose true range Cancellatio 3. Any new Sell Setup whose true range (the
(the difference between its highest true n difference between its highest true high and its
high and its lowest true low) is smaller lowest true low) is smaller than the true range of
than the true range of the prior Buy the prior Sell Setup or greater than 1.618 times
Setup or greater than 1.618 times the the true range of the prior Sell Setup is ignored
true range of the prior Buy Setup is and the prior Sell Setup remains the active Sell
ignored and the prior Buy Setup remains Setup and its Countdown phase continues.
the active Buy Setup and its Countdown
phase continues. 4. Within Setup (Setup contained with the previous
setup). This setup cancellation occurs when a
4. Within Setup (Setup contained with the setup recycles but the extreme high close and the
previous setup). This setup cancellation extreme low close of the recently completed sell
occurs when a setup recycles but the Setup phase are contained within the extreme
extreme high close and the extreme low high and the extreme low of the previously
close of the recently completed buy completed sell Setup. In this case, the current sell
Setup phase are contained within the setup is ignored and the previous sell Setup is
extreme high and the extreme low of dominant and its Countdown phase remains intact.
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

the previously completed buy Setup. In

this case, the current buy setup is 5. Extended Setup. If Setup bars extend to 18, the
ignored and the previous buy Setup is Countdown is cancelled and an R appears where
dominant and its Countdown phase the countdown bar’s 13 would otherwise be.
remains intact.

5. Extended Setup. If Setup bars extend to

18, the Countdown is cancelled and an
R appears where the countdown bar’s
13 would otherwise be.

1. A new Buy Setup occurs « before, on, or 1. A new Sell Setup occurs « before, on, or after »
after» completion of the TD Buy completion of the Sell Countdown and prior to a
Countdown and prior to a bullish price bearish price flip (which perfects the Sell
flip (which perfects the Buy Countdown) Countdown) and its true range is equal to, or
and its true range is equal to, or greater greater, the size of the previous TD Sell Setup but
than, the size of the previous TD Buy less than 1.618 times its true range. The TD Sell
Setup but less than 1.618 times its true Setup with the larger true range becomes the
range. The TD Buy Setup with the larger active TD Sell Setup and the Countdown phase
true range becomes the active TD Buy associated with it is the valid one.
Setup and the Countdown phase
associated with it is the valid one.

Recycling 2. Extended Setup. A Recycle occurs when Recycling 2. Extended Setup. A Recycle occurs when a new TD
a new TD Buy Setup which started Sell Setup which started « before, on, or after »
« before, on, or after » completion of completion of the Buy Countdown and prior to a
the Buy Countdown and prior to a bearish price flip extends to 18 bars – that is 18
bullish price flip extends to 18 bars- that closes, with each one greater than the close 4
is 18 closes, with each one less than the price bars earlier.
close 4 price bars earlier.
CLOSE of bar 13 of TD Buy Countdown <= CLOSE CLOSE of bar 13 of TD Sell Countdown >= CLOSE of bar 8 of
Qualifier of bar 8 of Buy Countdown OR the LOW of bar Qualifier Sell Countdown OR the HIGH of bar 13 of TD Sell
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

13 of Buy Countdown <= CLOSE of bar 8 of the Countdown >= CLOSE of bar 8 of TD Sell Countdown
TD Buy Countdown
TD Termination In order to prevent the possibility of TD Buy TD In order to prevent the possibility of TD Sell Countdown
Count Countdown proceeding to 12 and price reversing Terminatio proceeding to 12 and price reversing without recording the
without recording the 13th bar of the TD Buy n Count 13th bar of the TD Sell Countdown, you can use the open or
Countdown, you can use the open or the low, the high, instead of the close, and compares it to the high
instead of the close, and compares it to the low two price bars earlier. This applies only to the last bar, the
two price bars earlier. This applies only to the 13th bar, of the TD Sell Countdown.
last bar, the 13th bar, of the TD Buy Countdown.
TD Termination Count states that all that is required to
TD Termination Count states that all that is record the final price of a sell Countdown would be for the
required to record the final price of a buy close, the open, or the intrabar high to be greater than the
Countdown would be for the close, the open, or high two price bars earlier.
the intrabar low to be less than the low two
price bars earlier.
1. Buy on the close 1. Sell on the close
2. Alternative entry methods : 2. Alternative entry methods :
a. Buy on the reversal bar, the signal a. Sell on the reversal bar, the signal bar, the
bar, the snap-back bar or the snap-back bar or the reversal confirmation bar
reversal confirmation bar b. Trail a sell-stop to go short 5 pips + the pip
b. Trail a buy-stop to go long 5 spread below the 1BL following the DTOsc
pips+the pip spread above the 1BH bearish reversal
following the DTOsc bullish reversal c. Trail a sell-stop to go short below the high of
c. Trail a buy-stop to go long above the the bar satisfying the Bishop rule (ADX)
Entry high of the Bar satisfying the Bishop Entry d. Evaluate the lower time frames for TD
Techniques rule (ADX) Techniques Sequential, TD Combo, or qualified TD Lines
d. Evaluate the lower time frames for breakouts
TD Sequential, TD Combo, or e. Swing low violation and moving average
qualified TD Lines breakouts crossover.
e. Swing high violation and moving
average crossover.
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

a) Find the bar with lowest true low a. Find the bar with highest true high throughout
throughout the entire TD Buy Setup the entire TD Sell Setup and TD Sequential
and TD Sequential Buy Countdown Sell Countdown process, whether or not it is a
process, whether or not it is a
numbered price bar;
numbered price bar;
Initial Stop Loss b) Calculate its true range (difference Initial Stop b. Calculate its true range (difference between its
between its true high and its true Loss true high and its true low); and
low); and c. Add that true range at that bar's true high
c) Subtract that true range from that
bar's true low d. An alternative stop-loss technique is to identify
the TD Buy Setup bar with the highest true high
d) An alternative stop-loss technique is to and to add to its high the difference between its
identify the TD Buy Setup bar with the
lowest true low and to subtract from its high and close.
low the difference between its close
and low.

Single In/Scale Out Money Management System. Single In/Scale Out Money Management System.
Trailing Stop Trailing
and Exit Adust the Stop Loss following a Swing high Stop and Adjust the Stop Loss following a Swing low violation and an
Strategy violation and an oscillator bullish reversal . Exit oscillator bearish reversal.
Strategy
Always watch the ADX for the Bishop Rule Always watch the ADX for the Bishop Rule.

TD Sequential Reinforcement Pattern (9-13-9) TD Sequential Reinforcement Pattern (9-13-9)

1. The TD Buy Setup must not begin before 1. The TD Sell Setup must not begin before or on the
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

or on the same price bar as the same price bar as the completed TD Sell
completed TD Buy Countdown, Countdown,
2. The ensuing TD Buy Setup must be Validation 2. The ensuing TD Sell Setup must be preceded by a
Validation preceded by a bullish Price Flip, which bearish Price Flip, which perfects the Sell
perfects the Buy Countdown, and Countdown, and
3. There must be no completed TD Sell 3. There must be no completed TD Buy Setup prior to
Setup prior to the appearance of the TD the appearance of the TD Sell Setup
Buy Setup
Note : This pattern is most effective if the lowest close Note : This pattern is most effective if the highest close of the Sell
of the Buy Setup formed after the 13 bar of the TD Setup formed after the 13 bar of the TD Sell Sequential
Buy Sequential Countdown is contained by the low of Countdown is contained by the high of the classic TD Sell
the classic TD Buy Sequential. Sequential.
Subtract the true range of the price bar with the Add the true range of the price bar with the highest true
Stop Loss lowest true low in the TD Buy Countdown and Stop Loss high in the TD Sell Countdown and subsequent TD Sell
ensuing TD Buy Setup from the true low of that Setup to the true high of that bar
bar.
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

Aggressive TD SequentialBuy Countdown Aggressive TD SequentialSell Countdown

13 price bars. To qualify as an Aggressive TD 13 price bars. To qualify as an Aggressive TD Sequential

Count Sequential Buy Countdown bar, the bar must Count Sell Countdown bar, the bar must have a HIGH >= HIGH
have a LOW <= LOW two trading bars earlier. two trading bars earlier.

Qualifier LOW of the Aggressive TD Sequential Buy Qualifier HIGH of the Aggressive TD Sequential Sell Countdown bar
Countdown bar 13 <LOW of the Aggressive TD 13 >HIGH of the Aggressive TD Sequential Sell Countdown
Sequential Buy Countdown bar 8 bar 8

TD Combo Buy Countdown version I TD Combo Sell Countdown version I

These conditions must be satisfied These conditions must be satisfied simultaneously :

simultaneously : 1. CLOSE >= HIGH two price bars earlier
1. CLOSE <= LOW two price bars earlier 2. HIGH > HIGH of the previous price bar
2. LOW <LOW of the previous price bar 3. CLOSE > CLOSE of the previous price bar
Requirements 3. CLOSE < CLOSE of the previous price Requirements 4. CLOSE >CLOSE of the previous numbered TD
bar Combo Sell Countdown price bar
4. CLOSE <CLOSE of the previous
numbered TD Combo Buy Countdown Note : The first bar of the TD Combo Sell Countdown satisfy
price bar the first 3 conditions only.
Note : The first bar of the TD Combo Buy
Countdown satisfy the first 3 conditions only.
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

TD Combo Buy Countdown version II TD Combo Sell Countdown version II

Bar 1 to bar 10 of the TD Combo Buy Bar 1 to bar 10 of the TD Combo Sell Countdown Version 2
Countdown Version 2 satisfy the same satisfy the same conditions as in version 1 :
conditions as in version 1 : 1. CLOSE >= HIGH two price bars earlier
1. CLOSE <= LOW two price bars earlier 2. HIGH > HIGH of the previous price bar
2. LOW < LOW of the previous price bar 3. CLOSE > CLOSE of the previous price bar
3. CLOSE < CLOSE of the previous price 4. CLOSE >CLOSE of the previous numbered TD
bar Combo Sell Countdown price bar
4. CLOSE <CLOSE of the previous However, TD Combo Sell Countdown bars 11, 12 and 13
numbered TD Combo Buy Countdown satisfy 2 conditions only :
Requirements price bar 1. CLOSE > CLOSE of the previous price bar
However, TD Combo Buy Countdown bars 11, Requirements 2. CLOSE >CLOSE of the previous numbered TD
12 and 13 satisfy 2 conditions only : Combo Sell Countdown price bar
5. CLOSE < CLOSE of the previous price
bar
6. CLOSE <CLOSE of the previous
numbered TD Combo Buy Countdown
price bar
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

TD Combo Buy Reinforcement Pattern ( 9-13-9) TD Combo Sell Reinforcement Pattern ( 9-13-9)

1. The TD Buy Setup must not begin 1. The TD Sell Setup must not begin before or on the
before or on the same price bar as the same price bar as the completed TD Sell
completed TD Buy Countdown, Countdown,
2. The ensuing TD Buy Setup must be 2. The ensuing TD Sell Setup must be preceded by a
preceded by a bullish Price Flip, which bearish Price Flip, which perfects the Sell
Validation perfects the Buy Countdown, and Validation Countdown, and
3. There must be no completed TD Sell 3. There must be no completed TD Buy Setup prior to
Setup prior to the appearance of the the appearance of the TD Sell Setup
TD Buy Setup
Note : This pattern is most effective if the lowest Note : This pattern is most effective if the highest close of the Sell
close of the Buy Setup formed after the 13 bar of Setup formed after the 13 bar of the TD Combo Sell Countdown
the TD Combo Buy Countdown is contained by the is contained by the high of the classic TD Combo Sell.
low of the classic TD Combo Buy

Aggressive TD Combo Buy Countdown Aggressive TD Combo Sell Countdown

All following conditions must be satisfied The following conditions must be satisfied simultaneously :
simultaneously: 1. HIGH >= HIGH two price bars earlier
1. LOW <= LOW two price bars earlier 2. HIGH > HIGH of the previous price bar
Requirements 2. LOW < LOW of the previous price bar Requirements 3. HIGH > HIGH of the previous numbered TD Combo
3. LOW < LOW of the previous numbered Sell Countdown price bar
TD Combo Buy Countdown price bar Note : The first bar of this new TD Combo Sell Countdown
Note : The first bar of this new TD Combo Buy satisfy the first 2 conditions only.
Countdown satisfy the first 2 conditions only.
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

Suggested Readings

DeMark, Thomas R., The new science of technical analysis, New York : Wiley, c1994

DeMark, Thomas R., New market timing techniques : innovative studies in market rhythm & price exhaustion, New
York : Wiley, 1997

DeMark, Thomas R., & DeMark, Thomas R. Jr., DeMark On Day Trading Options, MacGraw Hill, 1999

Tom Demark, Trend Spotting with TD Combo, in David Keller, Breakthroughs in Technical Analysis : New Thinking from the World’s
Top Minds, pp. 25-34

Tom Demark on indicators and market timing, in The Technical Analyst (www.technicalanalyst.co.uk), Issue 21, March/April 2007,
pp. 20-26

Trevor Neil, Demark Indicators on CQG

Kurt Magnus, Impressive Signals from Demark, in The Technical Analyst, September/October 2004, pp. 20-24

Perl, Jason, DeMark indicators, New York, NY : Bloomberg Press, 2008

Trevor Neil, Demark Indicators on CQG, 2007, 63 pages

Tom Demark and Rocke Demark, Countertrend forex trading with TD Sequential, Currency Trader magazine,
January 2005, pp. 28-33

Lindsay Glass, Demarking trend exhaustion zones, Active Trader (activetradermag.com), July 2002, pp.64-67

Bloomberg, Technical Analysis: Demark Indicators, 20 May 2005, version: 2.00, 46 pages.

Jason Perl Interview, The Technical Analyst, Issue 30, October 2008, pp. 41-44

Trevor Neil, TD-Wave: A rule-based approach to Elliott Wave Analysis, Technical Analysis, Issue 30, pp. 32-33
 Personal Notes on Demark Patterns
by Emmanuel Nyemera, PhD

Aspen Graphics, DeMark Studies User’s Guide, 114 pages

Marco Lissandrin , Statistical Testing of DeMark Indicators in Commodity Futures Markets, Master Thesis, Department of
Management, Technology, and Economics, Swiss Federal Institute of Technology Zurich, August 2014, 86 pages.