Ehlers Smoothed Stochastic & RSI with Roofing Filters

The Ehlers Smoothed Stochastic & RSI with Roofing Filters indicator utilizes John Ehlers' roofing filter technique to eliminate market noise and highlight cyclical turning points with significantly reduced lag.

Usage

The indicator can be used to identify trend exhaustion and potential reversals by observing the interaction between the filtered Stochastic line and its moving average. When the main line crosses the signal line within extreme zones (overbought or oversold), it suggests a high-probability reversal point.

• Bullish Signals: Look for the Stochastic line crossing above the signal line or crossing back above the oversold level.
• Bearish Signals: Look for the Stochastic line crossing below the signal line or crossing back below the overbought level.
• Smoothing Options: Users can toggle "Double Smoothing" to further refine the output, which is particularly useful in highly volatile market conditions to avoid false signals.

Details

The core of this tool is the Roofing Filter, which acts as a passband filter. It combines a High-Pass filter to eliminate "spectral dilation" (cycles longer than the upper band, typically 48 bars) and a Super Smoother filter to eliminate high-frequency noise (cycles shorter than the lower band, typically 10 bars).

By only allowing spectral components between these two periods to pass, the indicator isolates the most relevant price movements. The resulting Stochastic calculation is performed on this filtered data rather than raw price, leading to a much cleaner oscillator that responds faster to actual trend shifts than traditional counterparts.

Settings

• Apply Double Smoothing: Enables an additional layer of the Super Smoother filter to the calculation for a cleaner output.
• Stoch Length: The lookback period used for the Stochastic calculation.
• Stoch MA Length: The length of the Simple Moving Average applied to the Stochastic line.
• Overbought Level: The threshold level used to identify overbought market conditions (default is 0.8).
• Oversold Level: The threshold level used to identify oversold market conditions (default is 0.2).
• Source: The price data input used for calculations (e.g., Close, Open, HL2).
• Roofing Band Upper: The cutoff period for the High-Pass filter to remove long-term trend bias.
• Roofing Band Lower: The cutoff period for the Super Smoother filter to remove short-term noise.

FAQ

How do I interpret the Roofing Filter bands?

The bands define the "window" of market cycles you wish to observe. The lower band removes noise (short cycles), while the upper band removes the overarching trend (very long cycles), leaving you with the tradable swing components.

What is the advantage of "Double Smoothing"?

Double smoothing applies the Ehlers Super Smoother algorithm twice. While this adds a small amount of lag, it drastically reduces "sawtooth" movements in the oscillator, making the primary direction much clearer.

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.