Step VHF adaptive VMA - indicator for MetaTrader 5

Step VHF adaptive VMA – indicator MetaTrader 5

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Theory:

VMA (Variable Moving Average) is often mistakenly confused with the VIDYA (Volatility Index Dynamic Average) which is not strange since Tushar Chande took part in developing both. But the VMA was preceding the VIDYA and should not be mistaken for it. The formula for original VMA calculation is the following:

VMA = (α * VI * Price) + ((1 – ( α * VI )) * VMA[1])

Where:

α = 2 / (N + 1)

VI = Users choice of a measure of volatility or trend strength.

N = User selected constant smoothing period.

About this version:

This version is, as it is obvious from its name, adding two options and some changes.

  • instead of using fixed user input for VI (the measure of volatility),and for which Tushar Chande was using Standard Deviation Ratio (SDR), it is using Adam Whites Vertical Horizontal Filter (VHF) and that way it makes it automatically adjust to current market volatility
  • it is adding an option to filter out some insignificant changes in slope direction by using step calculation (setting the step size to 0 produces original VHF adaptive VMA – without steps filtering)
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VMA, as is, is a “good candidate” for this type of filtering since it tends to produce prolonged periods of nearly horizontal values when the volatility of the market is low, so, when the step filtering is applied to it, the small slope changes that are happening as a results of the semi EMA calculation are filtered out, and signals are becoming more usable.

Usage:

You can use the color change as signals. Some experimenting with step size (since this version is using step size based on pips that is entered as users input).

Step VHF adaptive VMA – indicator MetaTrader 5
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