Big Mike's Trading Blog

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Simple VMA strategy

Here is a simple strategy for trading the ES using the VMA indicator.

The VMA (Variable Moving Average) is also known as VIDYA or Variable Index Dynamic Average.  It's an exponential moving average that auto adjusts the smoothing weight based on the volatility of the data. 

In times of low volatility, such as when the price is trending, the period should be shorter for the inevetiable break in trend.  However, in times of more volatile non-trending bars, the period should be longer to filter out chop.

VMA uses the CMO indicator for internal volatility calculations.  You can adjust the length of both periods.

 
Try a setting of VMA(High, 9, 18) for longs (line color blue in example).  Setting of VMA(Low, 9, 18) for shorts (line color red in example).  Put them both on the chart.
When a bar fully closes above/below, enter the position.  For instance, if the Low of the bar is above the long line, go long.  If the High of the bar is below the short line, go short.
Mike

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