VIDYA: an average that speeds up when momentum is one-sided

What it measures

VIDYA varies its smoothing constant according to how one-sided recent momentum has been, measured by the absolute value of the Chande Momentum Oscillator.

When momentum is strongly directional the average accelerates toward price; when up and down movement are balanced it barely moves.

It solves the same problem KAMA solves and measures it differently: KAMA asks how efficiently price travelled, VIDYA asks how lopsided the buying and selling were.

How it is calculated

These are the steps Basis performs, verified against the published definition.

1. 1

   Compute the Chande Momentum Oscillator over the momentum period and take its absolute value, scaled to a fraction between zero and one.

2. 2

   Multiply the base smoothing constant by that fraction to get this bar’s effective smoothing.

3. 3

   Apply that constant to the previous VIDYA value and the current price.

Settings

A momentum period around nine with a base period of fourteen is common. The momentum period decides how far back "one-sided" is measured, and shortening it makes the average far twitchier than shortening the base period would.

How to read it

• A flat VIDYA through an active market means the movement has been two-sided, which is a range regardless of how large the swings were.
• The line accelerating is momentum becoming one-sided, which usually precedes the visible part of a trend.
• Crossings mean more here than on a fixed average, because the line only moves quickly when the underlying condition justifies it.
• Because the smoothing constant is bounded below by zero, VIDYA can stop almost completely in a balanced market and stay flat through a great deal of price movement. A flat line here means the movement was two-sided, and that is a statement worth reading rather than a failure to track price.

Where it misleads

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