Trend Envelopes Using Parabolic Weighted Price Filtering

Summary

This document describes a histogram version of Trend Envelopes that lets the user calculate the indicator from smoothed or filtered prices instead of raw prices. The filtering method is a parabolic weighted moving average, which the author characterizes as fast enough for this use. The histogram is intended to emphasize the trend component and make the indicator more suitable for signal systems.

Filtering is presented as a way to reduce the number of signals and potentially remove signals a trader does not want. The smoothing period can be set to one or less to disable filtering, regardless of the selected smoothing type. The description does not provide the envelope formula, detailed signal rules, comparative chart evidence, or backtest results, so it does not establish whether the filter improves trading outcomes; the effect may depend on the trader's approach.

Key ideas

• Trend Envelopes can use smoothed or filtered prices instead of raw prices.
• The specified price filter is a parabolic weighted moving average.
• Filtering is intended to reduce signal frequency and screen out unwanted signals.
• A smoothing period of one or less disables the filtering.
• The histogram display emphasizes the trend component, but no performance evidence is provided.

Tags

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