Saturday, May 4, 2013

Adaptive Indicators 3 - ADX Adaptive

I am continuing with my experiments with adaptive Indicators. The possibilities are extensive and exciting. The next indicator I was looking was the ADX. It is one of my favourite indicators and I had done some work on it already like the Gaussian smoothed  ADX and a Volume biased ADX.

If we look at the the calculation of the ADX, there are two places where we can make it adaptive. First in the calculation of MDI and PDI we have the smoothing of the UP move and down moves. Then we have the average true range. SO we can make the Smoothing period adaptive tot he Dominant cycle period. Also the averaging of the True Range would be based on the Dominant cycle period. Finally the smoothing in the calculation of the ADX itself will be made adaptive to the Dominant cycle. The images are provide below. We can notice that though the Adaptive ADX does not drastically change the ADX it  is more pronounced and the moves are swifter and faster. The AFL is provided for those who are keen to experiment with this Indicator.

The AFL - KADX - Adaptive

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