Adaptive Moving Average Trend Filter with Volatility Bands
Summary
The indicator combines adaptive smoothing, a direction-sensitive trend filter, and volatility bands to depict trend direction and possible support or resistance areas. It estimates slope relative to ATR and uses that direction to select an averaged high or low price as its input. Smoothing responds to changes in recent highs or lows, while the filter holds its prior level until the smoothed price moves far enough to clear an ATR-based offset. The plotted line changes color according to the relationship between price and the filter.
The document describes adjustable smoothing and band-width parameters, with suggested shorter settings for volatile markets and longer settings for slower charts. It provides implementation code but no comparative tests, trading results, or validation that its signals outperform conventional averages. The proposed use is trend identification across medium- to long-term horizons; the bands are visual references rather than demonstrated support or resistance levels, and the indicator alone does not specify entries, exits, or risk controls.
Key ideas
- The filter normalizes recent price slope by an accumulated volatility estimate and selects averaged highs or lows based on its direction.
- Adaptive smoothing reacts to detected changes in rolling highs or lows and otherwise changes more gradually.
- An ATR-derived offset makes the trend line hold its previous value until movement exceeds a threshold.
- Envelope bands and line colors provide visual context for trend direction and volatility.
- The document offers code and parameter suggestions but no empirical performance evidence.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.