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Abel Average
Definition:
The Abel Average was developed by Paul Abel and is a form of an “adaptive moving average” and is intended to provide buy and sell signals when prices break out of a range or break out of a sideways market. It is displayed as an overlay.
Formula:
Although the Abel average starts from the idea of tracking the average price over a given number of periods, it is intended to reduce the “trend-following” characteristics associated with typical moving averages.
Input:Periodicity
Constant: Yesterday\'s_Factor=(1/Periodicity), DragFactor=(1-Yesterday\'s_Factor)
Variables: DragValue
First bar: AbelAvg=(Open+Close)/2, and record AbelAvg and H,L,C for tomorrow\'s calc.
Second bar and thereafter... DragValue=(Yesterday\'s_AbelAvg*DragFactor)
AbelAvg=(DragValue)+(Yesterday\'s_Low*Yesterday\'s_Factor)
* Unless (Yesterday\'s_Close is less than Yesterday\'s_AbelAvg), in which
case... AbelAvg=(DragValue)+(Y\'s_High*Yesterday\'s_Factor)
Interpretation:
Abel Averages can be interpreted like a moving average, but the conventional interpretation is that an upturn could be considered bullish and a downturn could be considered bearish.
Because it is designed to be less “trend-following” then many overlays, it does not need to wait for a crossover to price or another moving average according to some traders.
Notes and references
See also
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