Adaptive ADX with VHF Smoothing and Floating Levels

Summary

This experimental ADX variant uses a Vertical Horizontal Filter (VHF) to adapt its effective calculation period to price movement, and applies an Exponential Smoothing and Innovation State Space Model (ISSM) filter to high, low, and close inputs. It derives directional movement and an ADX-like series from the smoothed values. Floating upper, lower, and median reference levels are calculated from the recent maximum and minimum of that series; the indicator changes color when its value is above the median level. Periods, smoothing, and level thresholds can be configured.

The author notes that the floating levels can sometimes appear out of sync, a limitation also present in the original version. The document supplies code and default settings but no comparative study, backtest, or evidence that adaptive levels improve trend identification. The levels depend on a rolling range, so their interpretation may shift as the lookback extremes change. Treat this as an experimental indicator description rather than a validated trading rule.

Key ideas

• VHF adjusts the ADX calculation period according to the relationship between price range and accumulated movement.
• ISSM smoothing is applied to price inputs before directional movement is calculated.
• Floating upper, lower, and median levels are derived from recent highs and lows of the indicator series.
• The indicator changes color when its value is above the floating median.
• The author flags possible timing mismatch in the levels and 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.