Filtering Moving Average Steps by Standard Deviation

Summary

This indicator modifies a moving average so that small changes do not immediately alter its displayed value. It compares movement against a required step size expressed as a percentage of standard deviation. When the average moves less than that threshold, its prior value is retained; once movement exceeds the step, the displayed average advances to the nearest qualifying value. The described variants include simple, exponential, smoothed, and linear weighted moving averages.

The proposed purpose is to reduce the many signals that can arise when an average’s slope changes in a ranging market. Scaling the step by standard deviation is intended to adapt the filter across time frames, addressing a weakness of fixed pip thresholds. Color changes can then be used as signals. The document provides no parameter settings, example charts, trading rules for entries or exits, or backtest results. The filter may reduce small fluctuations, but the text does not establish that it improves profitability or avoids lag in changing market conditions.

Key ideas

• The indicator holds its prior moving average value until the average moves beyond a threshold.
• The threshold is based on a percentage of standard deviation rather than a fixed pip distance.
• The adaptive threshold is intended to make step behavior more consistent across time frames.
• The filter can be applied to simple, exponential, smoothed, and linear weighted averages.
• Color changes are suggested as signals, but no performance evidence or complete trading rules are provided.

Tags

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