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2006issue C091-4

Constructing an adaptive price zone from a double-smoothed range

A short-horizon channel is assembled around a double-smoothed exponential centerline, with width taken from a double-smoothed high-low range. Bounces and zone crossings are treated as short-term reversal candidates in choppy conditions, while an Average Directional Index reading flags when a penetration may continue rather than reverse.

  • The adaptive price zone is a channel around a short-term double-smoothed exponential moving average, so the bands can track recent fluctuations with less lag than an equally weighted average.
  • Width is an adaptive range: a five-period double-smoothed exponential moving average of high minus low, scaled by a deviation factor and applied above and below the centerline.
  • When the Average Directional Index stays below 30, zone violations are described as more consistent short-term reversals; above 30, a penetration may continue rather than reverse immediately.
  • If price does not reverse within a few bars after leaving the zone, the procedure exits and accepts a small loss rather than waiting for a delayed snapback.
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Current trackMean reversion43 readingsAverage Directional Index71 readingsExponential smoothing117 readings

A channel around a double-smoothed centerline

The adaptive price zone is constructed as a channel around a short-term double-smoothed exponential moving average. The bands can then track recent price fluctuations with less lag than an equally weighted average.

The starting centerline

A five-period exponential moving average of another five-period exponential moving average of closing prices is presented as the starting centerline for the zone. That double application of Exponential smoothing is the path the upper and lower bands follow.

Width from an adaptive range

Zone width is formed from an adaptive range. A five-period double-smoothed exponential moving average of high minus low is scaled by a deviation factor and then added to and subtracted from the centerline.

Bounces and crossings in choppy conditions

The construction treats prices that bounce inside the zone, and crossings above or below it, as short-term reversal candidates in choppy, nontrending conditions.

Worked daily and intraday settings

A worked daily example uses period length 30 and a band percentage of 1.8 on the emini S&P continuous contract. An intraday example uses period length 30 and a band percentage of 2.1.

Exits, scale-outs, and retuning

If price does not reverse within a few bars after leaving the zone, the procedure treats that as a reason to exit and accept a small loss rather than wait for a delayed snapback. The same envelope can be used to exit or scale out when price pushes to the outer band. Both the period and the deviation factor may be retuned for a given market or sampling interval.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
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All readings on this track · 36 readings
  1. 1986A futures fade as one range, order, and secrecy procedure
  2. 1992Constructing the mass-index range-reversal procedure
  3. 1993Switch trend following and mean reversion with an equity-curve filter
  4. 1994Evaluating weekly trend-following and mean-reversion timing rules
  5. 1996Dual-horizon bands for a precious-metals cash switch
  6. 1997Constructing a moving regression oscillator
  7. 1997Regime-dependent long and short rules in mechanical systems
  8. 2002A same-session pair book with a morning-fixed volatility envelope
  9. 2004Combining noncorrelated trend and reversion systems
  10. 2004Failed-breakout overlays on trending markets
  11. 2004Rank rotation after a path split, then Robustness testing
  12. 2004Range-bound tape as a filter for trend and oscillator rules
  13. 2005A moving-average short pullback that is only in scope in a decline
  14. 2006Constructing an adaptive price zone from a double-smoothed range
  15. 2007Two-period relative strength index versus a one-week universe baseline
  16. 2008Building ETF mean-reversion entries with a two-bar washout
  17. 2008Rebuild a short-period stochastic as a premier stochastic oscillator
  18. 2008A three-market regime map for equity bounces and dollar cycles
  19. 2009Option trade adjustment as one testable procedure
  20. 2010Implied volatility as a May 2010 market-regime lab for the S&P 500
  21. 2011Treat a large one-day move as a classified event
  22. 2011Long-call exits, volatility regimes, and spread assignment
  23. 2011Pairing same-horizon oscillators with a walk filter
  24. 2012Two-bar band extreme entries with trailing stops
  25. 2012An eight-month average as a monthly gate for high-yield bonds
  26. 2014Complete the checklist before the trade
  27. 2014Coded rules should face one test, not a kinder sample
  28. 2015Build a mean-reversion basket from one correlation path
  29. 2015Index dip reversion is horizon and regime dependent
  30. 2016Treat the end of a trend as a handoff, not a broken system
  31. 2017A testable half-swing pullback for trend continuation
  32. 2017Evaluating four swing detection rules for mean reversion
  33. 2018Intraday breakout and mean reversion as one rule set
  34. 2018Evaluating rare consecutive-close mean-reversion entries
  35. 2020Moving-average baselines, price vetoes, and mean reversion
  36. 2020Two-dimensional FX scaling for trend and reversal systems
By fieldIndicators and filters682 readingsBy year200683 readings
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Also on Mean reversion5 readings
1986A futures fade as one range, order, and secrecy procedure1992Constructing the mass-index range-reversal procedure1993Switch trend following and mean reversion with an equity-curve filter1994Evaluating weekly trend-following and mean-reversion timing rules1996Dual-horizon bands for a precious-metals cash switch