TASC 2022.10 RS VA EMA

13 Sep 2022

█ OVERVIEW

TASC's October 2022 edition Traders' Tips includes the second part of the "​Relative Strength Moving Averages" article series authored by Vitali Apirine. This is the code that implements the ​Relative Strength Volume-Adjusted ​Exponential Moving Average (​RS VA ​EMA) presented in this publication.


█ CONCEPTS

In his article series, the author argues that the relative strength of price, ​volume, and ​volatility can potentially be used to filter price movements and define turning points. In particular, the ​RS VA ​​EMA indicator is designed to account for the ​relative strength of ​volume. Like the traditional ​exponential moving average (​EMA), it is a lagging trend-following indicator. The difference is that it responds more quickly.

In a trading strategy, ​​RS VA ​EMA is suggested to be used in combination with ​​EMA of the same length to determine the overall trend or in combination with ​RS VA ​EMA of a different length to identify turning points and filter price movements.

█ CALCULATIONS

The calculation of ​RS VA ​EMA is based on the concept of ​volume strength (VS). By definition, VS measures the difference between "positive" and "negative" ​volume flow. ​Volume is indicated as "positive" when the close is higher than the previous close and "negative" when the close is below the previous close.

The following steps are used in the calculation process:
• Calculate the ​volume strength (VS) of a given length.
• Multiply VS by a predefined multiplier and calculate the ​EMA of the resulting time series.

The values of 10,10,10 are the typical input settings for ​RS VA ​EMA, where the first parameter is the length of the moving average, the second is the length of VS, and the third is the ​volume strength multiplier.