This study is an experiment utilizing the Ehlers Gaussian Filter technique combined with lag reduction techniques and true range to analyze trend activity.
Gaussian filters, as Ehlers explains it, are simply exponential moving averages applied multiple times.
First, beta and alpha are calculated based on the sampling period and number of poles specified. The...
Mean Reversion and Momentum
Interpretation:
- Divergence means trend reversal
- Parallel movement means trend continuation
Squares above serve as a confirming signal
Gaussian Filter script.
This indicator was described by John F. Ehlers in his book "Rocket Science for Traders" (2001, Chapter 15: Infinite Impulse Response Filters).
When smoothing data there is always a trade-off between lag and removal of noise.
Gaussian filter has a consistently low lag and a very smooth curve.
This filter works for poles higher than the 4 (usual usage).
Mathematically maximum poles is 15 after which coefficients are too high to see any difference.
By tuning Lag and number of Poles you can achieve a very...
![BTCUSD: Gaussian Channel [DW]](https://s3.tradingview.com/w/WpVY7GKW_mid.png "Gaussian Channel [DW]")
![AIONBTC: NG [Gaussian Filter Multi-Pole]](https://s3.tradingview.com/m/MxgNScFI_mid.png "NG [Gaussian Filter Multi-Pole]")
