Variable Moving
Average is a powerful VertexFX client side VTL indicator derived from the
family of Adaptive / Dynamic Moving Averages which provides excellent
entry and exit signals. Since adaptive Moving Averages are trend-following by
nature, this indicator too is a trend following indicator.
The Variable Moving
Average uses a variable period to determine the Moving Average. As a result it
responds faster to market trends and cycles, unlike fixed period Moving
Averages which responds in the same way irrespective of the market trend or
cycle.
This indicator is
calculated in five steps:
At first step, we
calculate the noise, which is the difference between the current close and
close VMA_PERIOD ago. The absolute value of this noise is added over the recent
VMA_PERIOD bars.
In second step, we
calculate the signal, which is the absolute difference between close VMA_PERIOD
ago.
In third step, the
signal-to-noise ratio (SNR) is calculated which is the ratio of the signal to
noise calculated from the previous steps.
In fourth step, we
calculate the smoothed values of SNR based upon the FAST_PERIOD and SLOW_PERIOD
smoothing constants.
Finally, this value
is normalized back into price by smoothing it with the price of the recent
VMA_PERIOD.
The main advantage of
the indicator is that the period used to calculate the moving average varies
dynamically. In sideways markets, the period is short because the market
exhibits whipsaw pattern with short interval. As the market starts trending,
the period increases because the number of bars from the recent sideways cycle
keeps increasing and hence the indicator gradually calculates the Moving
Average using a larger period.
When the trend changes, again the distance from the recent peak or trough decreases and hence the period decreases.
Buy: Place Buy
position when price closes above the Variable Moving Average indicator and the
indicator color turns Yellow. Do not open position if candle opens gap-up above
the indicator.
Sell: Place Sell
position when price closes below the Variable Moving Average indicator and the indicator
color turns Magenta. Do not open position if candle opens gap-down below the
indicator.
To use Variable
Moving Average indicator download it from here, then place it at VertexFX
VTL directory:
C:\ProgramData\VertexFX
Client Terminals\"Company name"\VTL10\Local VTL Scripts
Then right click on
the tree and select refresh or restart your client station and you will find
under VTL local scripts in your client
terminal.
You can check this
video that talks about Variable Moving Average indicator: