VIDYA is a variable-length exponential moving average. It responds to volatility, so that the length increases when prices move in a narrow range and decreases when prices change rapidly. As Chande says in "The New Technical Trader," VIDYA slows down when prices are quiet, and speeds up when prices make their move." You may have noticed that exponential moving averages are more responsive to price changes than simple moving averages, that they tend to give signals sooner; well, VIDYA is intended to be even more responsive.
To calculate variable moving averages, you have to have yesterday's moving average. That sounds easy enough, but it isn't, because the formula has to reference itself. or call itself over and over. WOW can't do that. I didn't believe it at first, even though Richard Estes warned me again and again. You can do it with Excel, by exporting price data from WOW, calculating VIDYA, and then importing VIDYA data into WOW, but you can't do it with WOW alone.
VIDYA is more complicated, but the formula for a basic variable moving average, based on volatility, would be something like this (from Achelis' "TA from A to Z"):
(.078(VR)*Close)+(1-.078(VR)*Yesterday's Moving Average)
where VR = volatility ratio
But to get yesterday's moving average, you need to reference the whole formula. WOW can't do it -- it runs in circles trying to bite its tail, but it won't hunt. You'll get an error message saying a formula can't reference itself.
A formula for doing it in Excel was published in the October 1995 issue of "Technical Analysis of Stocks and Commodities."
I don't have an MS version of the VIDYA formula. I think it comes as one of the set indicators, not as a custom formula. Someone might have a custom version, though.
I ignored Richard's warnings, and went hopelessly insane trying to formulate VIDYA for WOW. My family had me locked up. Fellow inmates at my new home shunned me in the halls. Respected psychiatrists openly snickered at me -- they didn't even attempt to humor me. They whispered among themselves about involutional formulosis, technical analytical psychasthenia, mouse- and keyboard-related motor tics, defects in mental makeup, psychobiological agitations, etc. The FBI and CIA quit monitoring my phone calls -- they knew my work was worthless. Though my condition was declared incurable, I was released eventually for the well-being of all the patients, and I drifted into my present job as an air-traffic controller.
My failed effort for WOW looked something like this, but it was completely and hopelessly wrong, because that last variable, VIDYA2, really has to be the whole VIDYA formula, but for the day before:
Vid1:
if (c>ref(c,-1), c- ref(c,-1),0)
Vid2:
abs(if (c<ref(c,-1),c - ref(c,-1),0))
Vidya:
((2/(pers+1))*(abs((sum(fml("Vid1"),pers2)-sum(fml("Vid2"),pers2))/
(sum(fml("Vid1"),pers2)+sum(fml("Vid2"),pers2))) )*c)+((1-( (2/(pers+1))*(abs((sum(fml("Vid1"),pers2)-sum(fml("Vid2"),pers2))/
(sum(fml("Vid1"),pers2)+sum(fml("Vid2"),pers2))) )))*ref(fml("Vidya2"),-1))
Vidya2:
((2/(pers+1))*(abs((sum(fml("Vid1"),pers2)-sum(fml("Vid2"),pers2))/
(sum(fml("Vid1"),pers2)+sum(fml("Vid2"),pers2))) )*c)+((1-( (2/(pers+1))*(abs((sum(fml("Vid1"),pers2)-sum(fml("Vid2"),pers2))/
(sum(fml("Vid1"),pers2)+sum(fml("Vid2"),pers2))) )))*ref(c,-1))
Where pers is 12 and pers2 is 9
There are probably lots of other things wrong with this formula, and it's not worth looking at closely, but I thought I'd show you the mess I got myself into before realizing that a WOW formula was impossible. In effect, my formula references something similar to itself once, and then gives up and just references the previous day's close. |
