DSMA
Deviation Scaled Moving Average adapts to price variations using standard deviation scaled oscillators.
Usage
Use as a highly adaptive moving average that tracks price closely during trends and large moves but provides heavy filtering during consolidation. Ideal for trend-following entries and trailing stops.
Background
In 'The Deviation-Scaled Moving Average' (2018), Ehlers introduces an adaptive EMA where the alpha (smoothing factor) is dynamically adjusted based on a deviation-scaled oscillator. By scaling the SuperSmoother-filtered momentum by its RMS, the indicator becomes reactive to significant price deviations while remaining smooth during low-volatility periods.
Parameters
period(default: 40): Critical period for smoothing and RMS calculation
Formula
[ Zeros = Close - Close_{t-2} ] [ Filt = c_1 \frac{Zeros + Zeros_{t-1}}{2} + c_2 Filt_{t-1} + c_3 Filt_{t-2} ] [ RMS = \sqrt{\frac{1}{P} \sum_{i=0}^{P-1} Filt_{t-i}^2} ] [ \alpha = \min\left(1.0, \left| \frac{Filt}{RMS} \right| \frac{5}{P}\right) ] [ DSMA = \alpha \cdot Close + (1 - \alpha) \cdot DSMA_{t-1} ]