Fine-tuning the demand index by Thomas E. Aspray
The Demand Index, which utilizes price and volume, calculates the buying pressure and selling pressure exerted on prices. These can be used to create an oscillator to identify accumulation or distribution in both stocks and commodities.
In analyzing the commodity markets, I use a series of approximately twelve technical studies which I
have selected after extensive historical research. If these studies are in agreement (uniformly bearish or
bullish), they determine how much emphasis to put on the daily studies.
For example, if the weekly studies are positive and the daily studies are negative, a short position would
be recommended only for scalpers, with close stops used. Conversely, if the daily studies were positive, a
larger position with wider stops could be taken. The studies I find most useful are those which combine
the price action with volume or open interest. One which I use extensively is the Demand Index,
developed by James Sibbet, which utilizes price and volume. I run this study in several different versions
over both the daily and weekly data.
The study calculates the Buying Pressure (BP) and Selling Pressure (SP) in the following manner for the
No Limit version.