The Demand Index is a combination of price and volume that appears to provide predictions of price changes. There are 6 rules when using the demand index:- weakness in price follows divergence between the demand index and price; after extreme peaks in the demand index, prices usually rally to new highs; tops are signalled by high prices and low demand index values; if the demand index goes below 0, a change in the trend has occurred; if it hovers near 0 for any time, price is weak; long term divergences indicate major tops or bottoms. To calculate this indicator is far too complex without special software, as 21 columns of data are required. As a lagging indicator, the demand index is of little use in day trading systems anyway, being more suited to longer term traders.
The Demand Index combines price and volume in such a way that it is often a leading indicator of price change. The Demand Index was developed by James Sibbet.
MetaStock Pro uses a slight variation on the Sibbet’s original Index so that the Index is displayed on a “normal” y-axis scale. The author’s Index is plotted on a scale labeled +0 at the top, 1 in the middle, and -0 at the bottom. MetaStock Pro uses a scale from +100 to -100. Other than the difference in y-axis labeling, the indicator is calculated exactly as designed by its author.
Thanks,the explanation is useful and informative.