Directional Smoothed Momentum with Optional Price Filtering

Summary

This note presents a directional momentum indicator that differs from conventional momentum by summing absolute one-period price changes over a chosen window, then assigning the sum a positive or negative sign according to whether the current close is above or below its value several periods earlier. The result represents movement magnitude while retaining a broad directional comparison.

The described version can first filter price through one of four moving-average types: simple, exponential, smoothed, or linear weighted. The author says this can reduce signals, including false signals, when decisions use the momentum slope, while adding some lag. A comparison with regular momentum using the same period is suggested as a way to inspect that tradeoff. The note offers no chart, numerical evaluation, trading rules, or backtest evidence, so it explains an indicator construction and claimed use rather than establishing that the filter improves trading outcomes.

Key ideas

• The indicator sums absolute changes between consecutive closing prices over a selected window.
• It assigns the summed movement a positive or negative direction based on a multi-period close comparison.
• Price can be filtered with simple, exponential, smoothed, or linear weighted averages.
• Filtering is presented as a way to reduce slope-based signals, with added lag as a tradeoff.
• The note provides no empirical evidence that the indicator improves strategy performance.

Tags

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