Double Smoothed Adaptive Moving Average (DSAMA) is a VertexFX indicator based on the Simple Moving Average (SMA) indicator. One of the biggest drawbacks of the SMA is the presence of lag which delays trade entries and exits. The DSAMA indicator offers three advantages of the SMA indicator. First and foremost, unlike the fixed period of the SMA, the period of the DSAMA is adaptive and is calculated based on a fast and slow period range. As a result, it shows a better response than normal SMA. Secondly, by using a smoothing algorithm, the lag is reduced thereby allowing traders to enter and exit trades faster before the price has moved too far away.
Building the Indicator:
In the first step, we calculate the greatest and smallest value of the price over the recent PERIOD candles. Based on the greatest, smallest, and the current value, the smoothing coefficient is calculated. Finally, the two levels of smoothing are applied, one using the FAST_PERIOD and then using the SLOW_PERIOD to reduce the lag.
The DSAMA comprises of the BLUE (bullish) and the RED (bearish) components. When the DSAMA is rising, the indicator is BLUE and when it is falling it turns RED.
BUY / EXIT SHORT - Enter LONG (or exit SHORT) when the indicator turns BLUE from RED color. Place the stop-loss below the nearest Swing Low. It is recommended to employ a trailing stop when the trade turns profitable.
SHORT / EXIT LONG - Enter SHORT (or exit LONG) when the Double Smoothed AMA indicator turns RED from BLUE color. Place the stop-loss above the nearest Swing High. It is recommended to employ a trailing stop when the trade turns profitable.
Building the Indicator:
In the first step, we calculate the greatest and smallest value of the price over the recent PERIOD candles. Based on the greatest, smallest, and the current value, the smoothing coefficient is calculated. Finally, the two levels of smoothing are applied, one using the FAST_PERIOD and then using the SLOW_PERIOD to reduce the lag.
The DSAMA comprises of the BLUE (bullish) and the RED (bearish) components. When the DSAMA is rising, the indicator is BLUE and when it is falling it turns RED.
BUY / EXIT SHORT - Enter LONG (or exit SHORT) when the indicator turns BLUE from RED color. Place the stop-loss below the nearest Swing Low. It is recommended to employ a trailing stop when the trade turns profitable.
SHORT / EXIT LONG - Enter SHORT (or exit LONG) when the Double Smoothed AMA indicator turns RED from BLUE color. Place the stop-loss above the nearest Swing High. It is recommended to employ a trailing stop when the trade turns profitable.