Using Noise-Eliminated Kendall Correlation to Color SMA Trends

Summary

The note describes an indicator that applies Noise Elimination Technology, characterized as a rolling Kendall rank correlation coefficient, to determine the trend of a simple moving average. This trend measure is distinct from the moving average’s slope, so the indicator’s trend direction or color may change at different times from what a slope-based interpretation would suggest.

The author proposes watching changes in the indicator’s color as possible signals of trend changes and advises experimenting with the NET period before using it for trading decisions. The note gives no parameter values, test results, or rules for entering or exiting trades. It therefore introduces an indicator concept and a possible way to interpret it, while leaving its predictive value and practical settings unvalidated.

Key ideas

• The indicator uses a rolling Kendall rank correlation concept called Noise Elimination Technology to assess an SMA’s trend.
• Its trend reading is not equivalent to the SMA slope, so the two can diverge.
• Color changes may be watched as possible indications of trend changes.
• The NET period should be explored before trading use, and the note provides no performance evidence.

Tags

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