The
adaptive moving average that was discussed in the interview with Perry
Kaufman in the 1998 STOCKS & COMMODITIES Bonus Issue (the article
originally appeared in March 1995) is an excellent alternative to standard
moving average calculations. In this month's Traders' Tips, I will present
two Easy Language studies and an Easy Language system that are based
on the adaptive moving average.
The
adaptive moving average calculation that is used in the studies and
system in TradeStation or SuperCharts is performed primarily by a function
referred to as "AMA." Another function referred to as "AMAF" is used
to calculate the adaptive moving average filter. As always, the functions
should be created prior to the development of the studies/system.
Type: Function, Name: AMA
Inputs: Period(Numeric);
Vars: Noise(0), Signal(0), Diff(0), efRatio(0), Smooth(1), Fastest(.6667), Slowest(.0645), AdaptMA(0);
Diff = AbsValue(Close - Close[1]);
IF CurrentBar <= Period Then AdaptMA = Close;
IF CurrentBar > Period Then Begin
Signal = AbsValue(Close - Close[Period]);
Noise = Summation(Diff, Period);
efRatio = Signal / Noise;
Smooth = Power(efRatio * (Fastest - Slowest) + Slowest, 2);
AdaptMA = AdaptMA[1] + Smooth * (Close - AdaptMA[1]);
End;
AMA = AdaptMA;
Inputs: Period(Numeric), Pcnt(Numeric);
Vars: Noise(0), Signal(0), Diff(0), efRatio(0), Smooth(1), Fastest(.6667), Slowest(.0645), AdaptMA(0), AMAFltr(0);
Diff = AbsValue(Close - Close[1]);
IF CurrentBar <= Period Then AdaptMA = Close;
IF CurrentBar > Period Then Begin
Signal = AbsValue(Close - Close[Period]);
Noise = Summation(Diff, Period);
efRatio = Signal / Noise;
Smooth = Power(efRatio * (Fastest - Slowest) + Slowest, 2);
AdaptMA = AdaptMA[1] + Smooth * (Close - AdaptMA[1]);
AMAFltr = StdDev(AdaptMA-AdaptMA[1], Period) * Pcnt;
End;
AMAF = AMAFltr;
The
"MovAvg Adaptive Fltr" system below is based on the rules set forth
for entries based on the filtered adaptive moving average calculation.
Type: System, Name: Adaptive Moving Average Fltr System
Type: System, Name: Adaptive Moving Average Fltr System
Inputs: Period(10), Pcnt(.15);
Vars: AMAVal(0), AMAFVal(0), AMALs(0), AMAHs(0);
AMAVal = AMA(Period);
AMAFVAl = AMAF(Period, Pcnt);
IF CurrentBar = 1 Then Begin
AMALs = AMAVal;
AMAHs = AMAVal;
End Else Begin
IF AMAVal < AMAVal[1] Then
AMALs = AMAVal;
IF AMAVal > AMAVal[1] Then
AMAHs = AMAVal;
IF AMAVal - AMALs Crosses Above AMAFVal Then
Buy This Bar on Close;
IF AMAHs - AMAVal Crosses Above AMAFVal Then
Sell This Bar on Close;
End;
The
second indicator, "Mov Avg Adaptive Fltr," takes the filtering concept
and applies it to an indicator. Based on the filtered adaptive moving
average (AMAF) parameters, this indicator will plot a vertical blue
or red line, depending on the condition that is met. The values reflected
by the vertical lines reflect the value of the AMA filter calculation.
Some suggested format settings are given after the indicator code.
Type: Indicator, Name: Adaptive Moving Average Fltr System
Type: Indicator, Name: Adaptive Moving Average Fltr System
Inputs: Period(10), Pcnt(.15);
Vars: AMAVal(0), AMAFVal(0), AMALs(0), AMAHs(0);
AMAVal = AMA(Period);
AMAFVAl = AMAF(Period, Pcnt);
IF CurrentBar = 1 Then Begin
AMALs = AMAVal;
AMAHs = AMAVal;
End Else Begin
IF AMAVal < AMAVal[1] Then
AMALs = AMAVal;
IF AMAVal > AMAVal[1] Then
AMAHs = AMAVal;
IF AMAVal - AMALs Crosses Above AMAFVal Then
Buy This Bar on Close;
IF AMAHs - AMAVal Crosses Above AMAFVal Then
Sell This Bar on Close;
End;
This
code is also available at Omega Research's Web site. The name
of the file is "AMA.ELA." Please note that all Traders' Tips analysis
techniques posted at Omega Research's Web site can be utilized
by both TradeStation and SuperCharts. Whenever possible, the posted
analysis techniques will include both Quick Editor and Power Editor
formats.
-- Gaston Sanchez, Omega Research
800 422-8587, 305 270-1095
Internet: http://www/omegaresearch.com
-- Gaston Sanchez, Omega Research
800 422-8587, 305 270-1095
Internet: http://www/omegaresearch.com