The Variable Index Dynamic Average (VIDYA) is a forex indicator that dynamically adjusts its sensitivity based on market volatility. In this guide, we’ll explore how VIDYA works, its advantages, and the best trading strategies to use it effectively.
The Variable Index Dynamic Average (VIDYA) is a trend-following moving average that adapts its smoothing factor based on market volatility. Developed by Tushar Chande, VIDYA is designed to be more responsive in trending markets and less reactive in ranging markets, reducing false signals.
VIDYA is calculated using the following formula:
VIDYA = VIDYA_previous + α × (Price – VIDYA_previous)
Where:
VIDYA helps traders determine trend direction with minimal lag:
Recommended VIDYA Settings:
Using two VIDYA lines with different periods generates trade signals:
Best VIDYA Combinations:
Pairing VIDYA with the Relative Strength Index (RSI) improves trade confirmation:
✅ Pros:
❌ Cons:
The Variable Index Dynamic Average (VIDYA) is a flexible and adaptive moving average that improves trend detection while reducing false signals. It’s ideal for traders looking for dynamic trend-following strategies.
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