Adaptive EMA Deviation Using Kaufman’s Efficiency Ratio
Summary
The note presents an adaptive alternative to standard deviation for measuring market variation, which traders commonly use as a proxy for current volatility. Instead of basing its mean on a simple moving average, this method uses exponential moving average properties to form an EMA-based deviation measure.
It adds Kaufman’s efficiency ratio to make the calculation adaptive, and claims this can make the measure more logical in highly volatile conditions. The document does not specify the exact formula, parameter choices, or tests supporting that claim. It therefore introduces the design idea but provides too little detail to reproduce the indicator or assess its behavior across markets.
Key ideas
- Standard deviation is commonly used to quantify data dispersion and market volatility.
- This variant bases its deviation calculation on exponential moving average properties rather than a simple moving average.
- Kaufman’s efficiency ratio is used to make the EMA-based measure adaptive.
- The note offers no formula or empirical evidence for its claim about performance in volatile conditions.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.