Dynamic Momentum Index with Volatility-Adaptive Periods and RSX Smoothing

Summary

The document describes a Dynamic Momentum Index (DMI) that adjusts its calculation period as volatility changes. It estimates volatility from price variability, smooths that estimate, and scales a base period accordingly, subject to configurable lower and upper bounds. When volatility rises, the period contracts, making the oscillator respond more quickly than a conventional RSI with a fixed lookback. The resulting measure is presented in RSI-like form, with configurable upper and lower levels for highlighting readings.

This variant applies RSX-style smoothing to the positive and negative price-change series before producing the oscillator. The description claims this makes the line easier to read and may reduce noise without adding lag, but provides no test data to substantiate that claim. The included settings and translated indicator implementation are practical reference material, not evidence of trading profitability. Thresholds are configurable, and oscillator readings alone do not establish a trade signal; users would need to assess behavior across instruments, settings, and market regimes.

Key ideas

• The DMI varies its lookback with volatility instead of using a fixed RSI period.
• Higher estimated volatility shortens the calculation period, increasing responsiveness to price changes.
• The implementation bounds the adaptive period and smooths positive and negative price changes using RSX-style calculations.
• Overbought and oversold levels are configurable, and the document does not provide performance tests for them.
• The claimed readability and lag benefits of RSX smoothing are not supported by reported empirical evidence.

Tags

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