It is possible to use a wide variety of filters for the estimation of a , one of the them being the ( ) which adapt to the market trend strength, by using in an we therefore allow for an adaptive low lag filter which might provide a smarter way to remove noise while preserving reactivity.
The aim to minimize the sum of the squared residuals, paired with we obtain a great adaptive solution for smoothing while conserving reactivity. Length control the period of the efficiency ratio used in , higher values of length allow for overall smoother results. The pre-filtering option allow for even smoother results by using as input instead of the raw price.
The proposed indicator without pre-filtering in green, a in orange, and a with all of them length = 200. The proposed filter allow for fast and precise crosses with the moving average while eliminating major whipsaws.
Same setup with the pre-filtering option, the result are overall smoother.
The provided code allow for the implementation of any filter instead of , try using your own filters. Thanks for reading :)