Corrected Moving Average with a Volatility-Dependent Filter

Summary

The document describes the Corrected Average, also called the Optimal Moving Average, as a smoothed price indicator. It starts from a simple moving average and compares the gap between that average and the prior corrected value with recent price volatility. When the gap is small relative to volatility, the indicator holds its prior value; when the gap is larger, it updates toward the simple average, with the adjustment determined by the relative squared values.

The intended effect is to reduce whipsaws when trends are weak, and the line may also serve as a potential support or resistance reference. The page includes an implementation example with a stated lookback length, but provides no chart, comparative study, or performance results. It does not establish that the filter improves trading outcomes, and its usefulness depends on parameter choices and market conditions.

Key ideas

• The indicator adjusts a simple moving average using recent volatility.
• It can hold its prior value when the average’s change is small relative to volatility.
• The method is intended to reduce false signals during weak trends.
• The line may be used as a possible support or resistance reference.
• The document gives no empirical evidence that the indicator improves results.

Tags

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