A Price-Bounded Recursive Filter for Smoothing Market Movements

Summary

This indicator constructs a recursive average-filter line using the current close and a configurable percentage band. With the example setting, it calculates artificial upper and lower levels around the close, initializes the filter from median price, then raises or lowers the filter when it falls outside that band. The displayed output includes both closing price and the filtered value. Bar colors distinguish closes above the filter from closes at or below it, making the line usable as a visual trend reference.

The description characterizes the result as a smoothed path through price movements, but provides no formal derivation, comparison with other filters, or trading rules. It gives no backtest or evidence of predictive value. The percentage parameter affects the band and therefore the filter’s responsiveness; the example is only one setting, and the document does not discuss how to select it. Users would need to assess lag, sensitivity, and behavior across instruments and market regimes before using the signal.

Key ideas

• The filter updates recursively when price crosses outside a percentage band around the close.
• Median price initializes the filter, and the indicator returns the close alongside the filtered line.
• Color changes show whether the close is above or at or below the filter.
• The document supplies no trading rules, parameter-selection method, or performance evidence.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.