Filtering Slope Signals from a Deviation-Scaled Moving Average

Summary

This note describes a filtered version of a deviation-scaled moving average, an indicator characterized as relatively fast. It identifies a practical drawback of using changes in the average’s slope as trading signals: during range-bound markets, the slope may change often and generate false signals. The modified indicator adds a filter intended to reduce those slope-change signals. Setting the filter size to zero disables the filter.

The suggested approach is to use the result like other moving-average indicators while experimenting with the filter size and period. The note gives no exact formula, parameter recommendations, examples, backtest, or evidence that the filter reduces false signals without adding excessive lag. Its guidance is therefore conceptual: filtering may help smooth noisy turns, but settings and usefulness need to be assessed for the market and timeframe in question before the indicator is used for trading decisions.

Key ideas

• The deviation-scaled moving average is described as fast, but its slope can change repeatedly in ranging markets.
• The modified version adds a filter intended to reduce false slope-change signals.
• A filter size of zero disables the added filtering.
• The note recommends trying different filter sizes and periods but provides no tested settings or performance evidence.

Tags

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