ATR-Stepped, Another New Adaptive Moving Average

The ATR-Stepped, Another New Adaptive Moving Average indicator provides a highly responsive adaptive moving average combined with an Average True Range (ATR) step filter to minimize noise and identify trend reversals based on price volatility.

Usage

The Usage section describes how the script can be used to navigate market trends. Traders can use this tool to stay aligned with the current trend direction and identify potential entry or exit points.

• Trend Identification: The indicator line changes color based on the prevailing trend. A green line signifies an uptrend, while a red line signifies a downtrend.
• Signals: When "Show Signals" is enabled, "L" (Long) and "S" (Short) shapes appear on the chart to highlight trend flips.
• Volatility Filtering: The ATR-Stepped mechanism requires the adaptive moving average to move by a specific multiple of the ATR before the output updates. This creates a "stepped" appearance that ignores minor price fluctuations.
• Trade Management: The indicator line can function as a dynamic trailing stop-loss or a target for take-profits, as it adjusts its sensitivity based on the "effort vs. results" logic of the underlying calculation.

Details

The script is based on the "New Adaptive Moving Average" concept introduced by Scott Cong, which evaluates market "effort" (total price movement/volatility) against "results" (net price change over a specific period).

The implementation features two primary components:

1. Adaptive Logic: The alpha (smoothing factor) is dynamically calculated by dividing the absolute price change over a period by the sum of the True Range over that same period.
2. ATR-Stepped Filter: Unlike standard moving averages that update every bar, this version uses a volatility-based threshold. The output only registers a change if the movement exceeds a user-defined multiple of the ATR. This prevents the indicator from reacting to low-volatility "market noise."

The indicator also incorporates "Expanded Source Types," allowing users to apply the calculation to various smoothed price inputs, including Heikin-Ashi variants and Kaufman-smoothed sources.

Settings

Source Settings

• Heikin-Ashi Better Calculation Type: Selects the smoothing method (AMA, T3, or Kaufman) used when specific "HAB" source types are chosen.
• Source: Determines the input data for the calculation, ranging from standard Close prices to complex Heikin-Ashi and trend-biased variations.

Basic Settings

• Period: The lookback length used to calculate the efficiency ratio (effort vs. results).
• ATR Multiple: The multiplier applied to the ATR to determine the minimum step size for the indicator to update.
• ATR Period: The lookback period for the Average True Range calculation used in the filtering process.

UI Options

• Color bars?: When enabled, price bars are colored to match the current trend state.
• Show Signals?: Toggles the visibility of "L" and "S" signal shapes on the chart.

Moving Average Inputs

• Kaufman's Adaptive MA (KAMA) Only - Fast/Slow End: Configures the smoothing constants for KAMA-based source types.
• Adaptive Moving Average (AMA) Only - Fast/Slow: Configures the period lengths for AMA-based source types.

FAQ

How do I interpret the trend flips on the ATR-Stepped, Another New Adaptive Moving Average? A trend flip occurs when the price action causes the adaptive calculation to exceed the ATR step threshold in the opposite direction, triggering a color change and a signal.

What is the benefit of the ATR Multiple setting? Increasing the ATR Multiple will make the indicator less sensitive to minor price movements, resulting in fewer but more significant signals, whereas a lower multiple makes it more responsive.

How can I access this tool? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.