Customizing Directional Movement with Alternative Moving Averages

Summary

This document explains how changing the moving average used in the Directional Movement System alters the smoothing of its components. It contrasts Wilder’s recursive average, described as a calculation-efficient approach developed for hand computation, with alternatives such as a weighted moving average. The author prefers the weighted version based on personal experience, but provides no quantified comparison or independent evidence of better results.

The accompanying indicator logic derives positive and negative directional movement from changes in highs and lows, normalizes their smoothed values by average true range, and calculates directional difference, ADX, and ADXR outputs. The example sets a 14-period window and appears to select a moving-average type through a parameter. The text does not define all available averaging choices or provide a trading strategy, backtest, or evidence that one smoothing method generalizes across markets and timeframes.

Key ideas

• Wilder’s recursive average was designed to reduce the work of hand calculations.
• The indicator allows the moving-average method used for directional movement calculations to be changed.
• The example computes positive and negative directional movement, average true range, DI values, ADX, and ADXR.
• The author favors weighted averaging based on personal experience, without presenting a measured performance comparison.

Tags

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