nardew
Wilder's Moving Average
Hello,
See https://www.incrediblecharts.com/indicators/wilder_moving_average.php
A number of popular indicators, including Relative Strength Index (RSI), Average True Range (ATR) and Directional Movement were developed by J. Welles Wilder and introduced in his 1978 book: New Concepts in Technical Trading Systems. Users should beware that Wilder does not use the standard exponential moving average formula.
Do we have WilderMA in talipp ? (not to be confused with WeightedMA)
Kind regards
PS: see also https://www.tradingview.com/script/wXtQeoOg/#:~:text=Wilder%20did%20not%20use%20the,where%20K%20%3D1%2FN.
Looking at
https://github.com/nardew/talipp/blob/ed5e0e10c986121b5762d4538649212ec05a9847/talipp/indicators/ATR.py#L58
$$output_{i} = \frac{output_{i-1} \cdot (period - 1) + TR_{i - 1}}{period}$$
with $k = \frac{1}{period}$
we have
$$output_{i} = output_{i-1} \cdot \frac{(period - 1)}{period} + \frac{1}{period} \cdot TR_{i - 1}$$
which is also
$$output_{i} = output_{i-1} \cdot (1 - \frac{1}{period}) + \frac{1}{period} \cdot TR_{i - 1}$$
and so
$$output_{i} = output_{i-1} \cdot (1 - k) + k \cdot TR_{i - 1}$$
So we can say that current talipp implementation at ATR is using Wilder's Moving Average for smoothing true range (which is fine!)
Maybe we could define such a MA in talipp and give user opportunity to use it's own MA for ATR calculation?
Maybe we should have an indicator called simply TrueRange which simply computes True Range of incoming bars and use a smoother as exposed in #146 to build ATR with Wilder's Moving Average.
This would simplify CHOP code which currently uses ATR(1) but will use instead just TrueRange() (because with period=1, k=1 and so
$$output_i = output_{i-1} \cdot (1 - 1) + 1 \cdot TR_{i - 1} $$
$$output_i = TR_{i-1}$$
Wilder's MA and SMMA seems to be the exact same thing.
This code https://github.com/nardew/talipp/blob/main/talipp/indicators/ATR.py#L53-L58 and https://github.com/nardew/talipp/blob/main/talipp/indicators/SMMA.py#L34-L40 could probably be refactored to use in ATR calculation SMMA