A New Adaptive Moving Average (Vama) Technical Indicator For Financial Data Smoothing

Pierrefeu, Alex (2019): A New Adaptive Moving Average (Vama) Technical Indicator For Financial Data Smoothing. Published in:

Abstract

The separation of the trend from random fluctuations (noise) is a major objective in technical analysis and for a long time two commons filters, the simple moving average and the exponential moving average have been used to achieve this goal, those two filters use one parameter to control this degree of separation, higher degree of separation involve smoother results but also more lag. Lag is defined as the effect of a moving average to show past trends instead of new ones, this effect his unavoidable with causal filters and is a major drawback in decision timing . In this article I will introduce a new adaptive moving average technical indicator (VAMA) who aim to provide smooth results as well as providing fast decision timing. This new method will be used for the construction of a simple MA crossover strategy in EURUSD, the results of this strategy will then be compared to the results of the same strategy using other adaptive moving averages to provide a comparison of the profitability of this indicator.

• Item Type: MPRA Paper
• Language: English
• Keywords: Moving Average · Adaptive Moving Average · Smoothing · Filters · Technical indicator · Technical Analysis · Volatility
• Subjects: G - Financial Economics > G0 - General > G00 - General; G - Financial Economics > G1 - General Financial Markets > G17 - Financial Forecasting and Simulation

References

[1] P. Kaufman, Trading Systems and Methods, John Wiley Sons, Third Edition (2008).

[2] J. Ehlers, "Fractal Adaptive Moving Average", Technical Analysis of Stock Commodities”, October 2005.

[3] MAMA, Ehlers, John F., “Rocket Science for Traders”, New York, John Wiley Sons, 2001

[4] VIDYA, Chande, Tushar S. and Stanley Kroll, “The New Technical Trader”, New York, John Wiley Sons, 1994