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Adaptive indicators

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by , 12-12-2022 at 11:31 AM (134 Views)
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Probably, every trader's dream is an indicator able to adapt to the current market situation, define flat and trend segments and consider relevant price changes. Conventional technical indicators use constant ratios when handling input signals. These ratios do not depend in any way on the characteristics of the input signal and its changes over time.

Adaptive indicators are distinguished by the presence of feedback between the values of the input and output signals. This feedback allows the indicator to independently adjust to the optimal processing of financial time series values. To put it even more simple, an adaptive indicator is a regular linear indicator with its ratios being able to change over time depending on the current market situation.

Adaptation algorithms are quite diverse. Choosing a specific algorithm depends on the purpose of the indicator. But most often, these algorithms are based on various methods of least squares. Let's look at a few examples of developing an adaptive indicator.

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