DeMark’s Range Expansion Index

DeMarks Range Expansion Index

This lesson will cover the following

  • Explanation and calculation
  • How to interpret this indicator
  • Trading signals, generated by the indicator

Developed and introduced by Thomas DeMark in the book “DeMark on Day Trading Options”, the Range Expansion Index (REI) is a market-timing oscillator, meant to cope with problems, which exponentially calculated oscillators, such as the Moving Average Convergence Divergence, encountered. The REI is arithmetically calculated.

The oscillator fluctuates between -100 and +100. Its default setting includes a period of 8. If a trader is willing to be provided with less but more reliable signals, he/she may use a larger period. If a trader is willing to be provided with more but less reliable signals, he/she may use a smaller period. Thomas DeMark recommends using the default setting.

If the indicator value exceeds the +60 level and then falls below it, a signal to sell is generated. If the indicator value moves below the -60 level and then surges above it, a signal to buy is generated.

Thomas DeMark does not recommend trading in extreme overbought or oversold conditions, indicated by six or more bars above or below the two thresholds.

DeMark's Range Expansion Index
Chart Source: VT Trader