Butterworth Moving Average: Recursive Smoothing Formula and Parameters

Summary

The document defines a Butterworth Moving Average indicator as a smoothed moving average built with a Butterworth filter. It identifies two configurable inputs: the calculation period and the applied price. The applied price is first represented as a one-period simple moving average, then combined with the previous two indicator values in a recursive calculation. Coefficients for the current price and prior indicator values are derived from the period through a square-root term.

This gives readers the indicator’s stated structure and parameterization, but the document provides no examples, comparisons with other moving averages, or evidence about predictive value. It also does not discuss initialization of prior values, edge cases, or how choices of period affect lag and smoothness. The formula is therefore a reference for implementation, not evidence that the indicator improves a trading strategy; users would need to validate its behavior and test any application independently.

Key ideas

• The indicator applies Butterworth-style smoothing through a recursive moving-average calculation.
• The period and applied price are its configurable parameters.
• The current price and two prior indicator values contribute to each calculated value.
• The document provides no empirical evidence about trading performance.

Tags

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