2017issue C0330
Comparing Wilder and exponential smoothing inside a relative-strength index
Hold the lookback fixed and swap only the smoother inside a relative-strength index. A standard exponential average registers a large one-session price change faster than Wilder smoothing, and the same swap speeds an open-scale buy-sell-pressure recast.
- A 14-period relative-strength index that uses a standard exponential average reacts to a large one-session price change faster than the same-length calculation that uses Wilder smoothing.
- On a single-session rise of about 20 percent in NFLX during October 2016, Wilder smoothing damped the oscillator more than a standard exponential moving average of the same lookback.
- A buy-sell-pressure series built with a regular exponential average responded more quickly to that jump than the Wilder-smoothed version, and afterward showed buying about six times selling.
- The bounded oscillator and the open-scale pressure recast share closely related cores, so their variation shapes stay similar even while the numerical readouts differ.
The smoother as a construction choice
A relative-strength index is a bounded oscillator of averaged up-moves versus down-moves over a stated lookback. This comparison keeps that oscillator skeleton and the lookback unchanged. It varies only the moving average used to smooth those up-moves and down-moves.
Wilder smoothing is the recursive averaging conventionally built into a relative-strength index. Exponential smoothing is a recursive average that weights recent observations more heavily. The ordinary exponential definition is contrasted here with Wilder recursion of the same length. Replacing Wilder averaging with a standard exponential moving average changes how quickly the series reacts.
A one-session price jump
A 14-period relative-strength index that uses a standard exponential average reacts to a large one-session price change faster than the same-length calculation that uses Wilder smoothing.
On a single-session rise of about 20 percent in NFLX during October 2016, Wilder smoothing damped the relative-strength-index response more than a standard exponential moving average of the same lookback.
An open-scale pressure recast
A buy-and-sell-pressure series built with a regular exponential average responded more quickly to that one-day NFLX jump than the version built with Wilder smoothing.
An open-scale pressure formulation encodes which side is larger by sign and the relative size of the two sides by magnitude. After the same jump, the open-scale pressure series showed buying about six times selling, a readout contrasted with a relative-strength-index print merely above 70 as an overbought flag.
Similar shapes, different readouts
Because the bounded oscillator and the open-scale pressure recast share closely related cores, their variation shapes stay similar even while the numerical readouts differ.
All readings on this track · 41 readings
- 1984Matching average age across price filters
- 1984Residual-impact construction of exponential smoothers
- 1988Constructing simple and exponential moving averages as specified filters
- 1989Evaluating smoothed free reserves and funds-discount spreads
- 1990Integer construction of moving averages and exponential smoothing
- 1990Constructing incremental moving average filters
- 1991Constructing a double-smoothed stochastic oscillator
- 1991Constructing an exponential average from a smoothing weight
- 1991Constructing a double-smoothed momentum oscillator family
- 1991Competing certainty rules from exponential-average conditions
- 1991Hybrid construction of a mechanical timing system from smoothed signals
- 1991Constructing an exponential smoother from a moving-average length
- 1991Equivalent relative-strength-index constructions from a ratio and from smoothed momentum
- 1991Constructing the true strength index from double-smoothed momentum
- 1991True strength index from signed, double-smoothed momentum
- 1992Constructing exponential averages from simple lookbacks
- 1992Constructing exponential averages by the smoothing constant, startup length and lag
- 1992Nested range smoothing and windowed high-low damping
- 1992A weekly equity stance from the discount-bill spread
- 1993Double-smoothed stochastics momentum index construction
- 1993Constructing the true strength index with double exponential smoothing
- 1994Polarized fractal efficiency with a shared exponential smoother
- 1994Five-interval exponential smoothing of ten-interval signed path-efficiency
- 1994Hand-ranked price-volume series with stacked smoothing and stochastic
- 1995Range expansion filter on multi-horizon averages
- 1995The exponential smoothing constant from averaging lag
- 1997Construct a nested-average rainbow band and oscillator
- 1998Filter stacks that combine a moving average with exponential smoothing
- 2002Smoothed relative-strength construction from wilder-averaging and a price prefilter
- 2003Reverse-engineered RSI price targets
- 2004Piecewise trend quality from moving-average reversals
- 2004Nested smoothing recipes versus unaudited oscillator experiments
- 2008Weight construction beyond the N-day label
- 2010A consensus filter for objective RSI and smoothing construction
- 2012Sentiment-zone oscillator from signed closes
- 2012Classic RSI one-over-N smoothing versus the standard exponential average
- 2013Why exponential smoothing uses two over n plus one
- 2015Constructing ratio indicators with moving-average and exponential-smoothing weights
- 2015Slow relative-strength index from an exponentially smoothed price
- 2017Rebuilding the relative strength index as open-scale buy-sell pressure
- 2017Comparing Wilder and exponential smoothing inside a relative-strength index