Third Generation Moving Averages for Reducing Indicator Lag

Summary

The document describes a third generation moving average designed to reduce the delay of a conventional moving average by increasing the moving average period according to a simple procedure. It attributes the method to Manfred G. Dürschner and says the implementation uses a lambda value of 2 for the greatest lag reduction; larger lambda values make its behavior more like a standard moving average.

Users can choose the output period, the underlying averaging method (simple, exponential, smoothed, or linear weighted), and the price input. The stated default output period is 50, with exponential averaging as the default method and typical price as the default input. In a chart comparison, the indicator is said to react somewhat faster than a conventional exponential moving average. It can be used like a standard moving average to estimate trend direction, but remains delayed and may produce false signals. No quantitative test, market comparison, or performance evidence is provided, so reduced lag should not be taken as proof of improved trading results.

Key ideas

• The indicator aims to reduce moving average lag by adjusting the period used in its calculation.
• The described implementation uses lambda equal to 2 for the strongest stated lag reduction.
• Users can select among four averaging methods and several price inputs.
• The indicator is presented as a trend direction aid, but it can still lag and generate false signals.
• The document provides a visual comparison but no systematic performance testing.

Tags

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