The Welles Wilders Smoothingindicator is similar to an exponential moving average. The indicator does notuse the standard exponential moving average formula. This indicator is used ina the manner that any other moving average would be used. Moving averages areused to help identify the trend of prices. By creating an average of prices, that moves with the addition of newdata, the price action on the security being analyzed is smoothed.
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Tuesday, February 7, 2012
Weighted Moving Average
A Weighted Moving Average placesmore weight on recent values and less weight on older values. A Moving Averageis most often used to average values for a smoother representation of theunderlying price or indicator. A weighted moving average is designed to putmore weight on recent data and less weight on past data. A weighted movingaverage is calculated by multiplying each of the previous periods data by aweight. The weighting is calculated from the sum of period. First, theexponentially smoothed average assigns a greater weight to the more recent data.Therefore, it is a weighted moving average. But while it assigns lesserimportance to past price data, it does include in its calculation all the datain the life of the instrument.
If larger weight factors are usedfor more recent periods and smaller factors for measurements further back intime, the trend will be more responsive to recent changes without sacrificingthe smoothing a moving average provides Weighted Moving Average smoothes a dataseries that is very important in a volatile market
Weighted Close
Weighted Close is an average ofeach days open, high, low, and close, where more weight is placed on the close.The Weighted Close indicator is a simple method that offers a simplistic viewof market prices. It gets its name from the fact that extra weight is given tothe closing price. It places greater weighting on closing price. Bothindicators approximate the average price traded for a period and is used asfilters in moving average systems.
The weighted close study isanother way of viewing the price data. It places a greater emphasis on theclosing price rather than the high or low. This process creates a single linechart. It provides clear and concise picture of the market
Volume ROC
The Volume Rate of Changeindicator shows clearly whether or not volume is trending in one direction oranother. Sharp Volume ROC increases may signal price breakouts. V-ROC is theindicator that shows whether or not a volume trend is developing in either anup or down direction. The Volume ROC shows the speed at which volume ischanging. This can be quite informative as almost every significant chartformation is accompanied by a sharp increase in volume.
The V-ROC shows the rate ofchange measured by volume. You will need to divide the volume change over thelast n-periods by the volume n-periods ago. The answer will be a percentagechange of the volume over the last n-periods.
With most markets, the volume canbe expected to within a constant range over time. When volume moves outsidethis range and begins to trend either upwards or downwards, then a capitulationof one sort or another can be expected. Using this breakout from the average,the VROC is best used as a confirmation indicator to other studies.
If the volume for the currentperiod is higher than n-period ago, the rate of change will be a plus number.If volume is lower, the ROC will be minus number. This allows looking at thespeed at which the volume is changing.
Volume Oscillator
The Volume Oscillator shows aspread of two different moving averages of volume over a specified period oftime. The Volume Oscillator offers a clear view of whether or not volume isincreasing or decreasing. The Volume Oscillator displays the difference betweentwo moving averages of a volume. The difference between the moving averages canbe expressed in either points or percentage.
You can use the differencebetween two moving averages of volume to determine if the overall volume trendis increasing or decreasing. When the Volume Oscillator rises above zero, itsignifies that the shorter-term volume moving average has risen above thelonger-term volume moving average, and thus, that the short-term volume trendis higher than the longer-term volume trend.
VIDYA
VIDYA (Volatility Index DynamicAverage), , is a moving average derived from linear regression R2. A MovingAverage is most often used to average values for a smoother representation ofthe underlying price or indicator. VIDYA is a derivative of linear regression,it quickly adapts to volatility. R2Scale is a double value specifying theR-Squared scale to use in the linear regression calculations. VIDYA (VolatilityIndex Dynamic Average) is a variable-length moving average, which adapts to thevolatility in question by exponentially smoothing data based on standarddeviation .The VIDYA uses a volatility index for weighting the data points.
In this moving average theadjustment is done primarily to improve its responsiveness in times ofheightened volatility. The indicator is more responsive to market pricemovements than a conventional simple or exponential moving average, and can beused for position trading
Variable Moving Average
A Variable Moving Average is anexponential moving average that adjusts to volatility. A Moving Average is mostoften used to average values for a smoother representation of the underlyingprice or indicator. A variable moving average is an exponential moving averagethat automatically adjusts the smoothing percentage based on the volatility ofthe data series. The more volatile the data, the more sensitive the smoothingconstant used in the moving average calculation. Sensitivity is increased bygiving more weight given to the current data.
During trading ranges (whenprices move sideways in a narrow range) shorter term moving averages tend toproduce numerous false signals. In trending markets (when prices move up ordown over an extended period) longer-term moving averages are slow to react toreversals in trend. By automatically adjusting the smoothing constant, avariable moving average is able to adjust its sensitivity, allowing it toperform better in both types of markets.
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