Braid Filter: Confirming Trend Direction with Moving Average Spread and ATR

Summary

The Braid Filter uses three moving averages to estimate market direction and whether a trend is strong enough to register. It measures the spread between the highest and lowest average, then compares that spread with a threshold set as a percentage of the 14-period Average True Range. In the described settings, the averages use periods of 3, 7, and 14, and the threshold is 40% of ATR. The histogram is green or red when the spread clears the threshold and the shorter averages indicate bullish or bearish direction; otherwise, it is gray.

This is a volatility-scaled technical indicator, not a standalone trading system. The document explains its calculation and display rules but provides no performance tests, entry or exit rules, or evidence that the threshold works across markets or timeframes. Results depend on the selected moving average type and parameters, so traders would need to evaluate those choices and account for the indicator’s lag before using it in decisions.

Key ideas

• The indicator calculates the spread between the highest and lowest of three moving averages.
• It compares that spread with a threshold derived from 14-period ATR.
• A spread above the threshold is colored according to the direction of the first two averages.
• A gray histogram indicates that the spread has not met the trend threshold.
• The document provides no backtest or evidence of profitability.

Tags

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