Last Updated on
Adaptive Moving Averages changes its sensitivity to price fluctuations. The Adaptive Moving Average becomes more sensitive during periods when price is moving in a certain direction and becomes less sensitive to price movement when price is volatile.
The chart below of the E-mini Nasdaq 100 Futures contract shows the difference between an Exponential Moving Average (see: Exponential Moving Average) which weights current prices more heavily than past prices and the Adaptive Moving Average which changes sensitivity based on price volatility:
The advantage of the Adaptive Moving Average is show above in the e-mini chart in the center where price became directionless and choppy. During that period the Adaptive Moving Average maintained a straight line appearance; whereas, the Exponential Moving Average moved with the choppiness of prices. However, when price trended, like on the far right of the e-mini chart above, the Adaptive Moving Average kept up with the Exponential Moving Average.
The Adaptive Moving Average is definitely an unique technical indicator that is worth further investigation.
The information above is for informational and entertainment purposes only and does not constitute trading advice or a solicitation to buy or sell any stock, option, future, commodity, or forex product. Past performance is not necessarily an indication of future performance. Trading is inherently risky. Commodity.com shall not be liable for any special or consequential damages that result from the use of or the inability to use, the materials and information provided by this site. See full disclaimer.