Ehlers Smoothed Adaptive Momentum

The Ehlers Smoothed Adaptive Momentum indicator is a technical analysis tool that adapts its lookback period to the dominant cycle of the market to provide a more responsive and filtered momentum reading.

Usage

The indicator is primarily used to identify trend direction and momentum shifts. Since it adapts to the current market cycle, it aims to reduce the lag typically found in fixed-length momentum oscillators. Traders often look for:

• Zero-Line Crosses: When the indicator crosses above zero, it suggests bullish momentum; crossing below zero suggests bearish momentum.
• Slope Changes: A change in the direction of the indicator can serve as an early warning of a potential trend reversal or exhaustion.
• Color Coding: The script visually differentiates between positive (green) and negative (red) momentum for easier interpretation.

Details

Developed by John F. Ehlers and described in his 2004 book "Cybernetic Analysis for Stocks and Futures" (Chapter 12: Adapting to the Trend), this indicator uses a Hilbert Transform to estimate the instantaneous period of the market.

Instead of a static momentum length, it calculates a "lookback" based on the dominant cycle. To ensure the output is clean and usable, the resulting momentum value is processed through a Super Smoother Filter. Users can choose between a 2-pole or 3-pole configuration for the filter, where the 3-pole version provides more aggressive noise reduction at the cost of slight additional lag.

Settings

• Cutoff: Defines the cutoff period for the Super Smoother Filter. Lower values allow more high-frequency noise, while higher values result in a smoother curve.
• Alpha: The alpha coefficient used in the initial cycle smoothing process.
• Super Smoother Filter Poles: Allows the user to select between 2 or 3 poles for the final smoothing filter.
• Source: The price data used for the calculation (e.g., Close, Open, HL2).

FAQ

How do I interpret the Ehlers Smoothed Adaptive Momentum?

Positive values (green) indicate upward momentum, while negative values (red) indicate downward momentum. The adaptive nature means the indicator speeds up or slows down based on market volatility.

What is the difference between 2-pole and 3-pole smoothing?

The 3-pole filter offers a steeper roll-off, meaning it removes more market noise than the 2-pole version, but it may introduce a small amount of extra lag.

How can I access this script?

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