Investing & Trading

Deviation Scaled Moving Average Study

By Samantha Baltodano


TL;DR:

The Deviation Scaled Moving Average (DSMA) is an adaptive moving average that quickly adapts to price volatility. It utilizes the exponential moving average and the Super Smoother Filter.


What Is the Deviation Scaled Moving Average Study?

The Deviation Scaled Moving Average (DSMA) is an adaptive moving average that rapidly adapts to volatility in the price movement of a security. The DSMA is a data smoothing technique that acts like an exponential moving average with a dynamic smoothing coefficient.


The smoothing coefficient is calculated using the following algorithm:


  • A two-bar close price difference is found and run through the Super Smoother Filter with half the period specified for the Deviation-Scaled Moving Average.
  • The root mean square of the value derived at Step 1 is calculated.
  • The ratio of the first value to the second value is found.
  • The smoothing coefficient will be equal to five times the absolute value of the ratio divided by the specified length.


Test The Deviation Scaled Moving Average Study

Great news! 


You can back test this exact strategy on historical data for any of your favorite symbols using TradingView. 


This strategy has already been built and all you have to do is log in and take it for a spin. You can access this indicator here.


If you’re new to back testing and to TradingView, don’t worry. I created a step-by-step guide you can follow to begin testing the Deviation Scaled Moving Average Study.

Deviation Scaled Moving Average is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.


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