VIDYA Indicator For MT4

Table Of Contents:

  1. VIDYA Indicator For MT4
  2. How is VIDYA Indicator For MT4 Constructed?
  3. How to Interpret VIDYA Indicator For MT4

Technical analysis is the study of past price data to forecast the future direction of a financial asset’s price, and traders are unlikely to find a better way to assess the trend in a market than with moving averages. There are numerous types of moving averages. Of them all, the VIDYA Indicator For MT4 is arguably the most recent to make its appearance. The VIDYA is a special type of moving average that automatically adjusts its speed based on an underlying asset’s price volatility.

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How is VIDYA Indicator For MT4 Constructed?

Variable Index Dynamic Average (VIDYA) was developed by Tushar Chande. The idea behind the indicator was first put forth by Chande in his widely acclaimed 1994 book, "The New Technical Trader." The VIDYA Indicator For MT4 is essentially an exponential moving average (EMA) that also factors in market volatility. This is achieved by using the Chande Momentum Oscillator as a gauge of price volatility. The VIDYA Indicator gets plotted faster as the short term market volatility spikes, whereas it slows down when the volatility declines.

To compute the VIDYA Indicator For MT4, two input parameters are required:
1. The time period over which VIDYA has to be averaged.
2. The time period for which volatility needs to be estimated.

Firstly, the Chande Momentum Oscillator (CMO) is calculated using the below given formula:

CMO(t) = (UpSum(t) - DownSum(t))/(UpSum(t) + DownSum(t))


UpSum(t) = sum of positive price increments for the time frame under consideration
DownSum(t) = sum of negative price increments for the specified period.

The CMO is then used to determine the value of the VIDYA Indicator For MT4.

VIDYA(t) = Price(t) * ABS(CMO(t)) * F + VIDYA(t-1) * (1 - F* ABS(CMO(t)))


ABS(CMO(t)) = absolute value of CMO;
F = 2/(Period_EMA+1) - smoothing factor
VIDYA(t-1) = previous value of VIDYA Indicator.

How to Interpret VIDYA Indicator For MT4

The VIDYA Indicator For MT4 can be used as any moving average to identify and trade price trends. Since the VIDYA is essentially an exponential moving average that accounts for volatility, it is able to capture the ongoing market trend much more accurately.

1. Identification of Trend

The primary function of the VIDYA Indicator For MT4 is to identify the direction and strength of a trend. This is done by simply assessing the direction and slope of the indicator. A swiftly rising VIDYA suggests that price is increasing rapidly. A moving average with a steep down slope shows prices are falling with great momentum. A flat VIDYA is synonymous with a directionless market. 

2. Crossovers

The crossover between a shorter term and a longer term VIDYA Indicator For MT4 can be used to generate “Buy” or “Sell” signals. The underlying principle is that when a crossover between a shorter and a relatively long term VIDYA materializes, it suggests that the trend of the market has changed.

3. Support-Resistance

Just like an EMA, the VIDYA Indicator For MT4 also often acts as support in an uptrend, and a price ceiling during a down trend. Whenever price is approaching a previously respected VIDYA, a reversal is more than likely, offering traders a good spot to initiate either long or short trades with favorable risk-to-reward ratios.


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