Traders' Tips from TASC Magazine

Regularization

Chris Satchwell's article, "Regularization" included the calculation method for two indicators;
a Regularized Exponential Moving Average and a Regularized Momentum. The MetaStock formulas below prompt for the number of periods in the moving average and for the regularization constant. Since the article did not include a range for the regularization constant, the formulas allows for any values between 0 and 20.

To create a formula in MetaStock, select Indicator Builder from the Tools menu. Click New and then enter the formula below. When finished click OK. Repeat for the second formula.

Name:Regularized EMA
Formula:
x:=Input("number of periods in moving average",1,500,21);
d:=Input("regularization constant",0,20,.5);
a:=2/(x+1);
(PREV*(1+(2*d))+(a*(C-PREV))-(d*Ref(PREV,-1)))/(1+d)

Name:Regularized Momentum
Formula:
x:=Input("number of periods in moving average",1,500,21);
d:=Input("regularization constant",0,20,.5);
a:=2/(x+1);
f:=(PREV*(1+(2*d))+(a*(C-PREV))-(d*Ref(PREV,-1)))/(1+d);
(f-Ref(f,-1))/f


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