WiseTrader Toolbox

Adaptive Indicators for Amibroker (AFL)

Written by Administrator

The WiseTrader Toolbox includes a number of indicators which adapt to market conditions. Standard indicators like RSI use a fixed number of periods in their calculation which can work well in some markets and poorly in others because markets sometimes trend and other times they trade sideways. The standard indicator would usually be tuned for certain market conditions like bullish trends but this is flawed due to a number of factors. Firstly, markets change and you cannot use the same number of periods in bullish markets as you do in side trading markets. Secondly, the number of periods in a standard indicator cannot be too small or too large otherwise you will be whipsawed out of the market or not capture large enough price moves. Adaptive indicators can help solve these problems. For instance, the following image of the adaptive indicator shows a 15-day exponential moving average in green, 40-day exponential moving average in yellow and a 10 - 100 day adaptive moving average in pink.

Adaptive EMA applied on the symbol XAO

Notice how the adaptive indicator exits earlier than the 40-day exponential moving average and avoids being whipsawed out of large trends like the 40-day exponential moving average. If you would like to see a video of the above adaptive exponential moving average click here.

The snapshot below shows the parameter window for the adaptive RSI. Most adaptive indicators with the exception of the adaptive MACD and EMA have the same parameter window but without the option of smoothing as they are moving average type indicators.

Parameter window for adaptive RSI indicator

Each adaptive indicator has a choice of 8 different adaptors to choose from. This includes trend filters and cycle based adaptors to suit different market types and conditions. Indicators like the RSI also have the option of 5 different smoothers to reduce noise and lag which actually works very well to reduce false signals and improve the responsiveness of the indicator. Take a look at the following simple example and notice how the overbought and oversold signals are more clearly defined and there is almost no lag introduced by applying the smoothing.

Smoothed RSI Example