Demand Index
The Demand Index is a technical indicator that uses both price and volume to measure buying and selling pressure in the market.
Developed by James Sibbet, this indicator is often seen as a leading signal of future price changes. Sibbet outlined six key rules for interpreting the Demand Index, which are useful for traders looking to apply it effectively:
A divergence between the Demand Index and prices suggests a potential price reversal.
A high peak in the Demand Index often comes before new price highs.
When prices rise but the Demand Index falls, it usually indicates a market top.
The Demand Index crossing the zero line signals a change in trend.
If the Demand Index stays around zero, it shows weak price movement that likely won’t last.
A long-term divergence between the Demand Index and prices points to a major market top or bottom.
To improve the accuracy of their trades, traders should combine the Demand Index with other technical indicators and chart patterns.
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