A Step-Threshold Moving Average to Reduce Small Revisions

Summary

This indicator turns a simple moving average into a stepped line. It initializes the output from the closing price, calculates an average over a chosen period, and updates the output only when the average moves above or below it by at least a specified threshold. Smaller movements leave the previous output unchanged. The threshold is expressed in price points or pips and should be adapted to the instrument.

The author suggests using the line with moving-average crossovers or price breakouts. The example uses a simple moving average and gives illustrative settings, but reports no backtest, performance results, or comparison with a standard moving average. The step filter may suppress small fluctuations, but the note does not establish that it prevents whipsaws or improves trading results; threshold choice and market conditions remain important limitations.

Key ideas

• The indicator updates its output only when the moving average moves beyond a chosen threshold.
• When the average stays within the threshold, the previous output value is retained.
• The threshold should be scaled to the instrument being traded.
• Possible uses include moving-average crossovers and price breakouts.
• The document provides no performance testing or evidence that the filter improves results.

Tags

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