Arnaud Legoux Moving Average Cross (ALMA)

The Arnaud Legoux Moving Average Cross (ALMA) indicator provides a trend-following strategy that utilizes two ALMA lines with a volume-based filter to identify high-probability entry points with reduced lag and enhanced smoothness.

Usage

The Usage section describes how the script can be used, examples should be provided in this section. This tool is primarily used to identify trend reversals and momentum shifts by observing the interaction between a fast and a slow Arnaud Legoux Moving Average.

• Long Entries: A bullish signal is generated when the Fast ALMA (Length 1) crosses above the Slow ALMA (Length 2), provided the Volume Oscillator is positive.
• Short Entries: A bearish signal is generated when the Fast ALMA crosses below the Slow ALMA, provided the Volume Oscillator is positive.
• Volume Filtering: The script uses a Volume Oscillator to ensure that moving average crossovers are supported by an increase in relative volume, which helps filter out "fakeouts" during low-liquidity periods.
• Risk Management: The strategy includes integrated Take Profit (TP) and Stop Loss (SL) parameters based on percentage moves from the entry price.

Details

The Arnaud Legoux Moving Average (ALMA) is designed to address the trade-off between smoothness and lag found in traditional moving averages like the SMA or EMA. It applies a Gaussian distribution (controlled by the Offset and Sigma settings) to the data window. This allows the moving average to track price action more closely than a standard EMA while maintaining a significantly smoother line.

The strategy incorporates a Volume Oscillator calculated as the percentage difference between a short-term and long-term EMA of volume. By requiring the oscillator to be above zero for an entry, the script ensures that trend changes are accompanied by rising momentum.

Settings

ALMA Fast/Slow Length Settings

• ALMA Length (1 & 2): Determines the window size for the fast and slow moving averages.
• Offset Value: Controls the trade-off between lag and smoothness; a value closer to 1 reduces lag but may increase noise.
• Sigma Value: Adjusts the width of the Gaussian distribution; higher values result in a smoother curve.

Volume Settings

• Short Length: The period for the fast volume EMA used in the oscillator.
• Long Length: The period for the slow volume EMA used in the oscillator.

Take Profit / Stop Percentage

• Long/Short Take Profit: The percentage gain required to trigger an exit.
• Long/Short Stop Loss: The percentage loss allowed before an exit is triggered to preserve capital.

FAQ

How do I use the Arnaud Legoux Moving Average Cross (ALMA) on different timeframes?

You can adjust the Fast and Slow Length settings in the indicator menu to better suit different timeframes, such as shorter lengths for scalping or longer lengths for daily swing trading.

Why didn't a signal fire during a crossover?

The script requires the Volume Oscillator to be greater than zero for a signal to trigger. If a crossover occurs on declining volume, the entry will be filtered out to avoid low-conviction trades.

How can I access the Arnaud Legoux Moving Average Cross (ALMA)?

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