A Velocity-Sign Trading Signal from a Smoothed Price Filter

Summary

The document presents a price-smoothing indicator that combines a smoothed estimate with a velocity term. It updates the estimate from the difference between current price and the prior prediction, then uses the velocity’s sign to indicate a long or short bias. The plotted filter changes color with that sign, while velocity is also returned as a separate series.

The material provides an implementation outline and describes the intended interpretation, but it gives no backtest, market, timeframe, transaction-cost assumptions, or performance evidence. It also does not explain how to initialize or manage the velocity state beyond the shown procedure, or how to choose the smoothing parameter. Treat the sign rule as a basic trend-following signal to investigate, not as evidence of a profitable strategy; the document does not specify exits, sizing, or risk controls.

Key ideas

• The filter updates its prediction using the gap between price and the prior prediction.
• A velocity term is added to the smoothed price estimate.
• Positive velocity indicates a long bias, while negative velocity indicates a short bias.
• The document provides no empirical evidence or risk-management rules for the signal.

Tags

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