Adapting an EMA with the Efficiency Ratio

Summary

The document describes an adaptive moving average that uses the efficiency ratio to adjust how an EMA responds to price movement. It attributes the efficiency ratio to Perry Kaufman and presents this version as a simplified alternative to his adaptive moving average, with only a period and a price input. The stated aim is to make the average responsive without requiring additional tuning parameters.

The indicator is presented for use like other moving averages. The author says it tends to produce smoother slopes than a conventional EMA while responding quickly when volatility rises, followed by smoother behavior. These claims are descriptive; the document gives no formula, quantitative comparison, backtest, or trading rules. The example comparison is mentioned but not included in the supplied text, so traders cannot assess the claimed behavior from evidence here alone.

Key ideas

• The efficiency ratio is used to adapt an EMA calculation to price movement.
• The described variant uses a period and a price input.
• The author characterizes its slope as smoother than a standard EMA while retaining a fast response to high volatility.
• The document supplies no formula, performance results, or complete comparison example.

Tags

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