TRADING TECHNIQUES
A New Twist on Ehlers' Zero-Lag Data Smoother
The Moving Trend
by William Rafter
Here's a look at a nonlagged filter that can be used as a forecasting
tool.
Data smoothing has long been likened to
taking the first generation of allergy medication. The medication relieved
the symptoms, but slowed you down so much that the effect seemed worse
than the original allergic discomfort. For years, I have been using a data
smoother called the "moving trend," which is the market's best
forecast - based on a previous trend - of where the price level should
be today. It proved to greatly diminish the lag problem. John Ehlers' article
in the July 2002 STOCKS & COMMODITIES prompted me to look at the moving
trend operation (movtrend) a little differently. In the process,
I learned something worth sharing.
Figure 1: MOVING AVERAGE VS. MOVING TREND. Note how the moving
trend more closely follows the moving average.
...Continued in the January 2003 issue of Technical Analysis of STOCKS
& COMMODITIES
Excerpted from an article originally published in the January 2003
issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights
reserved. © Copyright 2002, Technical Analysis, Inc.
