Variance-Gated Adaptive Moving Average Crossover System
Summary
This indicator replaces fixed-rate moving average crossovers with two adaptive lines: one tracks the simple moving average, while the other tracks closing price. Each line adjusts according to the squared gap from its reference value relative to recent price variance. When the gap is large compared with variance, the line can move toward its input; otherwise, the variance gate holds it nearly still. Their crossovers are used as directional momentum signals, and a colored fill displays which line is higher.
The document describes the indicator’s intended behavior rather than presenting a formal performance study. It says the lines can remain steadier through noisy periods and separate during trends, but may confirm reversals later than conventional moving averages. It suggests using the approach on trending instruments and longer timeframes, with a shorter-term momentum measure if earlier entries are needed. The lookback controls responsiveness: shorter settings yield more signals, while longer settings emphasize larger trends. The stated benefits are qualitative, with no backtest evidence, transaction costs, or risk-adjusted results provided.
Key ideas
- The system uses recent price variance to gate how quickly its adaptive lines move.
- One line follows the simple moving average, while the other follows raw price.
- A crossover between the two lines is treated as a change in directional momentum.
- The method is intended to reduce movement during noisy conditions, but can delay reversal signals.
- Longer lookbacks emphasize larger trends, while shorter lookbacks increase responsiveness and signal frequency.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.