[PYenner]

Some ramblings as I try to make sense of a new toy.

Walter found a VMA indicator made by Bemac for the VT platform and had the sense and experience to see that it offered something special.

Walter likes to keep trading simple (otherwise you go nuts!) and the flat lines from Bemac's indicator give a very clear reference mark on a chart for beginning and ending trades and for thinking about your options.

But what makes the indicator line go flat?
What makes it switch from following a trend to going flat and then back to trending again?

What needs to be improved in the way it-
1. follows trends?
2. changes from trend to flat?
3. changes from flat to trending?
4. does it have more uses still?

I think of it as an ADX_VMA because it comes in two parts.

The first part of the code is an ADX and some of the advantages come from the way an ADX works. It automatically adjusts itself to any range of sawtooth and ignores it. Instead, it aims at seeking out any trend component hidden in all sorts of choppy rubbish. This is what makes the flat area or horizonal effect possible. When the price goes into a choppy sawtooth the ADX main signal goes low, 0-40% is low. The VMA indicator switches from following the trend to flat line.

When a small trend is present the flat region may step up or down a few pips to show that a small trend is happening inside the sawtooth.

Once the trend component is big enough compared to the sawtooth component, the ADX gives a bigger signal, 40% up to 70% on a clean trend with little fallback. This lets the indicator switch to trend following.

There are adjustments that can be made to how closely it follows a trend and to how cleanly it switches from trend to flat and back again.
What you don't get and maybe don't need is an adjustment for the range of sawtooth movement it should ignore, that part happens automatically inside the ADX and it makes things easy.

Nice stuff and it is the ADX that does it. But if you ever tried to trade off an ADX signal you probably went nuts and gave up, too tough.

Thats where the VMA part comes in and gives a flat line when the ADX signal is below 40%.
VMA means Veriable Mean Average but what it does is simple.
When the ADX signal is low, it uses a long slow average, many bars or "periods".
When the ADX signal is high, it uses a short fast average, as few as two bars effectively.

Think of the fantail, the magenta line is the slowest to curve, it has the longest slowest curve, maybe 100 bars in that average, old news.
The Yellow side of the fantail is fastest, bends quickest, follows the trend closest, maybe 2 or 4 bars in that average, recent news only.
The VMA part decides how many bars to include in its calculation of an average price, many bars give an older price, fewer bars give a recent price.
It can stick with the past or stick with the present or somewhere in between, variable.

Trend following uses the prices from just the last few bars and ignores the past.
Flat line uses the past prices and ignores the present until it has something to say thats worth hearing.

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Walter has experience at trading with the indicator and historical charts only tell you part of the story about what you need from an indicator in order to trade easily with it. So I will rely on his comments and introduce concepts for tuning ADX_VMA performance by using fewer or more "periods" or "bars" or "counts" in a sample or average. Fast means small numbers, slow means big numbers.

If the ADX samples too few bars, maybe 4 or less, you get overshoot, it follows the trend after it should have gone flat.
If the ADX uses too many bars, you get undershoot, a slow curve into or out of the flat zone, it should have gone flat quicker than that.
Optimum is somewhere in between.
Time to find a picture.