Chande’s Momentum Oscillator and Variable Index Dynamic Average (VIDYA)

The VIDYA is similar to the exponential moving average (EMA) but automatically adjusts the smoothing weight based on the volatility of the prices.

The VIDYA was developed by Tushar Chande and presented in March, 1992 in “Technical Analysis of Stocks & Commodities” magazine. In the first version, a standard deviation was used as the Volatility Index. In October, 1995 Chande modified the VIDYA to use a new Chande Momentum Oscillator (CMO) as the Volatility Index.

CMO(n) formula is:

D[i] = PRICE[i] – PRICE[i – 1]

CMO1[i] = IF D[i] > 0 THEN D[i] ELSE 0

CMO2[i] = IF D[i] < 0 THEN -D[i] ELSE 0

S1[i] = SUM(CMO1 for last n periods before i)

S2[i] = SUM(CMO2 for last n periods before i)

CMO[i] = (S1[i] - S2[i]) / (S1[i] + S2[i]) * 100

VIDYA(n) Formula is

K = 2 / (n + 1)

SC[i] = ABS(CMO(n)[i])

VIDYA[i] = K * SC * PRICE[i] + (1 – K * SC) * VIDYA[I - 1]

Just for information: the original VIDYA(short, long) formula were

K = 2 / (short + 1)

SC = STDEV(PRICE for last short periods before i) / STDEV(PRICE for last long periods before i)

VIDYA[i] = K * SC * PRICE[i] + (1 – K * SC) * VIDYA[I - 1]

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See also absolute CMO below (viewtopic.php?f=17&t=301#p1250)

The indicator was revised and updated