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In this paper, a dynamic localization algorithm is proposed for the tracking of mobile subjects in a wireless ad hoc network environment. This algorithm integrates a dynamic multidimensional scaling (MDS) method and the dead reckoning method enabled by a wearable position tracking (WePoST) system through sensor fusion technique. The essential idea of the dynamic MDS (DMDS) is to reduce the localization error by increasing the network density and connectivity through the addition of virtual nodes. Sensor fusion technique is used to improve the consistency of the dynamic MDS algorithm by integrating the knowledge of short distance displacement. Tests done in simulation verify the proposed dynamic localization algorithm.