Adapting a Variable Moving Average with VHF and Step Filtering

Summary

This indicator modifies a variable moving average (VMA) by using Adam White’s Vertical Horizontal Filter (VHF) as its variable input. In the VMA formula, the current price and prior average are blended using a smoothing constant multiplied by a measure of trend strength or volatility. Replacing a fixed user-selected measure with VHF makes the smoothing adapt to changing market conditions. The document distinguishes this VMA from VIDYA, a related but different moving average.

An optional step filter suppresses small changes in the indicator’s slope direction. Its threshold is set in pips; setting the threshold to zero removes the filter and leaves the VHF-adaptive version. The rationale is that the VMA can stay nearly flat in low-volatility periods, where small calculation-driven slope changes may otherwise create noisy signals. The suggested use is to treat color changes as signals and experiment with the step size. No backtest, performance evidence, or rules for position sizing and risk control are provided, so the signal’s usefulness requires separate evaluation.

Key ideas

• The VMA blends price with its prior value using a smoothing rate adjusted by a variable input.
• This version uses VHF to adapt the input to changing trend or volatility conditions.
• An optional pip-based step threshold filters small slope-direction changes.
• A zero step threshold disables the filter.
• Color changes can be used as signals, but the document provides no performance testing.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.