Improving the responsiveness of exponential moving averages when price gaps
Tutorial 127 explains techniques for modifying the exponential moving average (EMA) calculation to account for price gaps. The tutorial explains an approach for a simple EMA applied to a regular chart (tutorial program _EMA_Gap) and also the more complex situation when calculating the EMA of a price series provider (PSP) (N.B. PSP functionality is not available in MultiCharts.
The image above shows a standard EMA in white and the one adjusted for gaps in green. Notice that the two EMAs converge during the day.
The above image shows a far more complex situation where both a ‘simple’ gap-adjusted EMA is calculated and plotted together with a far more complex PSP gap-adjusted calculation, i.e. rather than calculate the gap adjusted EMA based on the 30 minute bar data in data 2, the program calculates the equivalent EMA using a PSP when it is applied to 5 minute bars.
What’s the point of using a Price Series Provider when you have data 2 loaded?
I utilized data 2 in the tutorial to demonstrate that the calculation from the simple EMA applied to data2 is the same as the calculation by the program using the smaller time frame in data1. _Tutorial127 does reference data2 BUT only to find the bar duration. This could easily be modified.
Programming lessons in _Tutorial127
The tutorial demonstrates how to:
- Utilize a price series provider
- Calculate an EMA with a PSP on a lower time frame chart
- Ensure that the EMA is updated, only when a PSP close update event occurs
- Modify the EMA calculation to adjust for a price gap after a new session begins.
- For a simple calculation
- For a PSP calculation
- To different calculations for real time and historic bars when using the PSP
How _Tutorial127 works
See the video and notes below for more information.
Program instantiates a PSP using the time interval of data 2. It detects whether the symbols are set to local or exchange time and sets the PSP time to the same. It loads data going back to the datetime of the first bar of the chart and creates an update event.
The update event detects when the close of the PSP bar occurs.
On the first bar of the chart the normal EMA and the one that takes account of gaps are set to close.
The program detects when the session number changes and measures the value of the gap (if any).
For non-real time bars
For historic bars the program calculates a normal EMA and one that takes account of gaps. This is calculated on each bar but the equivalent of the EMA last bar is only set when a new PSP bar begins to form as determined by a change of the bar time. This is done by setting
TimeLast = PSP.Time;
within the subroutine and then checking when PSP.Time (the time of the PSP) is different.
For real-time bars
The real time formulae are the same only now we wait for a close update event of the PSP. At the next real time tick after this the equivalent of the EMA last bar is set.
Tutorial 127 assumes that the EMA is calculated on the close.
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Gold Pass area
Video explanation of _Tutorial127
Tutorial 127 | Video Part 2
A Gold Pass member asked how to remove the reference to data 2 from tutorial 127. In this second video I explain this.
Please let me know if you spot any bugs or errors or have questions.
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