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Strategies & Market Trends : Technical Analysis- Indicators & Systems
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To: CynicalTruth who wrote (1104)5/14/1997 8:48:00 PM
From: Richard Estes   of 3325
 
A variable moving average is an exponential moving average that automatically adjusts the smoothing constant based on the volatility of the data series. The more volatile the data, the larger the smoothing constant used in the moving average calculation. The larger the smoothing constant, the more weight given to the current data. The opposite is true for less volatile data.
Typical moving averages suffer from the inability to compensate for trading range and trending markets. During trading range markets (when prices move sideways in a narrow range) shorter term (i.e., more sensitive) moving averages tend to produce numerous false signals. In trending markets (when prices move up or down over an extended period) longer term (i.e., less sensitive) moving averages are slow to react to reversals in trend. By automatically adjusting the smoothing constant, a variable moving average is able to adjust its sensitivity, allowing it to perform better in both types of markets.

A ratio of the VHF indicator today to the VHF indicator 12 periods ago is used for the volatility ratio. The higher this ratio the "trendier" the market, thereby increasing the sensitivity of the moving average.
This method of calculating a variable moving average was presented by Tushar Chande in the March 1992 issue of Technical Analysis of Stocks and Commodities.

VMA=(0.078*(VOLITILITY RATIO)XCLOSE+(1-0.078*(VOLATILITY RATIO)XREF(VMA-1)

I AM NOT SURE WHAT TS IS TRYING FOR. i HAVE SEEN A COUPLE OF AMAs, never tried for them with VAR in tact.
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