Trend filter [Jamallo]

(2025)

This is a trend qualification and filtering tool.

Breakdown:

Signal Line — Vervoort ATR Trailing Stop

The signal line is an implementation of the ATR Trailing Stop developed by Sylvain Vervoort, first published in Technical Analysis of Stocks & Commodities, Volume 27, Issue 6 (June 2009), in his article "Average True Range Trailing Stops" .

The stop uses a modified ATR calculated on the average price (O+H+L+C)/4 rather than the plain close.

Baseline — Kalman Filter
The baseline is derived from the Kalman Filter, a recursive algorithm developed in 1960 by Rudolf E. Kálmán, a Hungarian-American engineer and mathematician. Originally developed for aerospace applications in the early 1960s — including guidance of the Apollo spacecraft.

In this indicator, the Kalman Filter acts as a smooth, low-lag trend estimate. Rather than applying fixed weights to historical data like conventional moving averages, it dynamically adjusts its trust between the predicted trend and observed prices.

Bands — Volatility Channels
Two pairs of bands (inner and outer) are built around the Kalman baseline using a 200-bar WMA.