Variable Moving Average (VMA)
A VMA is an EMA that's able to regulate its smoothing percentage based on market inconstancy automatically. Its sensitivity grows by providing more weight to the ongoing data as it generates a better signal indicator for short and long term markets.
The majority of ways for measuring Moving Averages cannot compensate for sideways moving prices versus trending markets and often generate a lot of false signals. Longer term moving averages are slow to react to reversals in trend when prices move up and down over a long period of time. A Variable Moving Average regulates its sensitivity and lets it function better in any market conditions by using automatic regulation of the smoothing constant.
To calculate the Variable Moving Average (VMA):
with VR = Volatility Ratio
VMA = [ { 0.0788 * VR } * Close ] + [ { (1 - 0.078) * VR } * yesterday's VMA ]
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