This indicator was developed by a gentleman named Patrick Mulloy. He created the indicator to try and produce less lag time than the standard moving average calculations. His attempt was to make an indicator that was much more sensitive to market changes.

The double exponential moving average can give traders a view of the long-term trend and because it is more sensitive it is a faster-moving average with less lag time. This can also enable traders to spot reversals quicker.

The double exponential moving average can help identify trend direction, signal potential short-term trend changes or pullbacks, and provide dynamic support or resistance.

Calculation:

DEMA( n ) = ( 2 * EMA( n ) ) - ( EMA( EMA( n ) ) )