Compound Ratio Weighted Average (CoRa_Wave) is a moving average where the weights increase in a “logarithmically linear” way – from the furthest point in the data to the current point – the formula to calculate these weights work in a similar way to how “compound ratio” works – you start with an initial amount, then add a consistent “ratio of the cumulative prior sum” each period until you reach the end amount. The result is, the “step ratio” between the weights is consistent – This is not the case with linear-weights moving average ( WMA ), or EMA
– for example, if you consider a Weighted Moving Average ( WMA ) of length 5, the weights will be (from the furthest point towards the most current) 1, 2, 3, 4, 5 — we can see that the ratio between these weights are inconsistent. in fact, the ratio between the 2 furthest points is 2:1, but the ratio between the most recent points is 5:4 — the ratio is inconsistent, and in fact, more recent points are not getting the best weights they should/can get to counter-act the lag effect. Using the Compound ratio approach addresses that point.
a key advantage here is that we can significantly reduce the “tail weight” – which is “relatively” large in other MAs and would be main cause for lag – giving more weights to the most recent data points – and in a way that is consistent, reliable and easy to “code”
– the outcome is, a moving average line that suffers very little lag regardless of the length, and that can be relied on to track the price movements and swings closely.
other features:
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– An accelerator, or multiplier, has been added to further increase the “aggressiveness” of the moving average line, giving even more weights to the more recent points – the multiplier will have more effect between 1 and 5, then will have a diminishing effect after that – note that a multiplier of 0 (which effectively causes a comp. ratio of 0 to be applied) will produce a Simple Moving Average line 🙂
– We also added the ability to use an “automatic smoothing” mechanism, that user can over-ride by manually choosing how much smoothing is used. This gives more flexibility to how we can leverage this Moving Average in our charting.
– User can also select the Resolution and Source price for the CoRa_Wave. by default, they will be set to “same as chart” and hlc3
(description from author RedKTrader, all credits go to him).
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//PRC_Adjustible CoRa_Wave | indicator //20.03.2023 //Nicolas @ www.prorealcode.com //Sharing ProRealTime knowledge //author: RedKTrader // --- settings length = 20 //length rmulti = 2.0 //Comp Ratio Multiplier smooth = 1 //Auto Smoothing mansmooth = 1 //Manual Smoothing // --- end of settings data = customclose if barindex>length then if smooth then s = max(round(sqrt(length)),1) else s = mansmooth endif source = data StartWt = 0.01 EndWt = length r = pow((EndWt / StartWt),(1 / (length - 1))) - 1 base = 1 + r * rmulti numerator = 0.0 denom = 0.0 cweight = 0.0 for i = 0 to length -1 cweight = StartWt * pow(base,(length - i)) numerator = numerator + source[i] * cweight denom = denom + cweight next coraraw = numerator / denom // ====================================================================== == corawave = weightedaverage[s](coraraw) coraup = corawave > corawave[1] if coraup then colorr=0 colorg=255 colorb=225 else colorr=255 colorg=152 colorb=0 endif endif return corawave as "Adjustible CoRa_Wave" coloured(colorr,colorg,colorb) style(line,3) |
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