This moving average moves slowly when prices are moving sideways and moves swiftly when prices move swiftly. The basic rule is to buy when the AMA turns up, and sell when the AMA turns down.
The Preferences . . .
- AMA Period - Period used to calculate the Direction as seen in the formula above. (10 is recommended)
- Fast SC Period - Period used to calculate the fast smoothing constant (2 is recommended)
- Slow SC Period - Period used to calculate the slow smoothing constant (30 is recommended)
Direction = Price - price(n) ; where n = AMA Period
Volatility = Sum(abs(price - price[1], n)
Effeciency Ratio (ER) = Direction / Volatility
Fast Smoothing Constant (FastC) = 2/(p + 1) ; where p = FSC Period
Slow Smoothing Constant (SlowC) = 2/(q + 1) ; where q = FSC Period
Scaled Smoothing Constant (SSC) = ER(FastC - SlowC) + SlowC
c = SSC*SSC
AMA = AMA[1] + c(price - AMA[1])
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