Direct Answer
Patrick Mulloy's DEMA reduces the lag of an exponential moving average by combining a single EMA with an EMA of that EMA. It is not an EMA smoothed twice, but a lag-compensated combination. It is read like a moving average: price above a rising DEMA suggests an uptrend, and below a falling DEMA a downtrend.
Double Exponential Moving Average: Formula, Meaning, Signals, Examples and How to Use It
How Is Double Exponential Moving Average Calculated?
Patrick Mulloy's DEMA reduces the lag of an exponential moving average by combining a single EMA with an EMA of that EMA. It is not an EMA smoothed twice, but a lag-compensated combination.
Formula: DEMA = 2 * EMA(Price, n) - EMA(EMA(Price, n), n)
Inputs:
- Prices
- Period n used for both EMAs
Worked example. With an EMA of 101.0 and an EMA of that EMA of 100.2, the DEMA is 101.80. The inputs are illustrative numbers, not market data.
Reading it. It is read like a moving average: price above a rising DEMA suggests an uptrend, and below a falling DEMA a downtrend. It reacts to turns sooner than an EMA of the same period.
Limits. Less lag comes with more overshoot, so it can swing past price after a sharp move and produce more false crossings. It needs more history to warm up than a single EMA.
What is Double Exponential Moving Average?
Patrick Mulloy's DEMA reduces the lag of an exponential moving average by combining a single EMA with an EMA of that EMA. It is not an EMA smoothed twice, but a lag-compensated combination.
How to use Double Exponential Moving Average
It is read like a moving average: price above a rising DEMA suggests an uptrend, and below a falling DEMA a downtrend. It reacts to turns sooner than an EMA of the same period. A reading alone is never a buy or sell signal; it needs context from price structure, volume, volatility and the broader market regime.
Strengths
- Subtracting the EMA of the EMA from twice the EMA cancels part of the lag that smoothing adds, using only two EMA calculations.
- The formula reuses one smoothing constant, so a single period n controls the whole line.
- Reproducible when the formula and data convention are fixed.
Weaknesses and limitations
- The 2 times EMA term amplifies recent noise, so the line is jumpier than a single EMA of the same period.
- Because the lag compensation assumes a persistent trend, its benefit disappears when direction changes every few bars.
- Correlated indicators can create false confidence by repeating the same underlying information.
Editorial and risk note
This page is educational content, not individualized investment advice. It should not imply guaranteed prediction, accuracy or outperformance.
Frequently Asked Questions
Is Double Exponential Moving Average a buy or sell signal?
No. It is read like a moving average: price above a rising DEMA suggests an uptrend, and below a falling DEMA a downtrend. Less lag comes with more overshoot, so it can swing past price after a sharp move and produce more false crossings. A trade built on it still needs a trigger, an invalidation rule, a position size and realistic execution assumptions.
What is the best setting for Double Exponential Moving Average?
Double Exponential Moving Average takes these inputs: prices; period n used for both EMAs. There is no universal best setting for the tunable ones, so test them across instruments, regimes and out-of-sample periods and favor stable parameter regions over one historical winner.
Can Double Exponential Moving Average be used by itself?
Less lag comes with more overshoot, so it can swing past price after a sharp move and produce more false crossings. It needs more history to warm up than a single EMA. For that reason it is read next to measures of direction, participation, valuation, liquidity and risk, not alone.
Does Double Exponential Moving Average work on every timeframe?
The calculation (DEMA = 2 * EMA(Price, n) - EMA(EMA(Price, n), n)) can be run on any bar size, but behavior is not portable: a reading on a five-minute chart describes a very different market window from the same reading on a daily chart. Validate the exact timeframe before relying on it.
Why does Double Exponential Moving Average give false signals?
The 2 times EMA term amplifies recent noise, so the line is jumpier than a single EMA of the same period. Because the lag compensation assumes a persistent trend, its benefit disappears when direction changes every few bars. Lag, noise and regime changes add to this, because market participants react to new information after the reading is calculated.
How should Double Exponential Moving Average be backtested?
Rebuild Double Exponential Moving Average from prices using point-in-time data, write the rules before testing, include delisted securities where relevant, model realistic fills and costs, reserve a validation sample and compare with a simpler baseline.