Gaussian Filter MACD

The Gaussian Filter MACD indicator provides a modified Moving Average Convergence Divergence oscillator that utilizes John F. Ehlers' Gaussian Filter for its core calculations. This tool aims to deliver smoother trend identification with significantly lower lag compared to traditional MACD implementations by leveraging higher-order Gaussian poles.

Usage

The Gaussian Filter MACD can be used to identify trend momentum and potential reversals through its oscillator lines and signals.

• Zero-Cross Signals: When the signal type is set to "Zero Cross," the indicator generates signals based on the MACD line crossing the zero level, indicating a shift in momentum relative to the baseline.
• Signal-Cross Signals: This mode generates signals when the MACD line crosses its smoothed signal line. While more sensitive, this method may produce more noise in ranging markets.
• Trend Visualization: The indicator features bar coloring and plot shapes to highlight bullish and bearish conditions. Users can choose from a wide variety of source types, including Heikin-Ashi and Adaptive MA variants, to further refine the data input.

Details

Developed based on the work of John F. Ehlers in "Rocket Science For Traders," the Gaussian Filter is a low-pass filter designed to reject high-frequency price movements while minimizing lag. Its transfer response follows a Gaussian bell-shaped curve.

A unique aspect of this implementation is the use of "poles":

• 1 Pole: Equivalent to an Exponential Moving Average (EMA).
• 2 Poles: Equivalent to a double-smoothed EMA.
• 3+ Poles: Further increases the degree of smoothing.

For an equivalent number of poles, a Gaussian filter exhibits approximately half the lag of a Butterworth filter. This implementation includes special initialization for each filter stage to ensure accuracy even on charts with limited historical data.

Settings

Source Settings

• Heiken-Ashi Better Smoothing: Selects the smoothing algorithm (AMA, T3, or Kaufman) used for specific source types.
• Source: Provides a comprehensive list of price source options, including standard OHLC, Heikin-Ashi, and expanded trend-biased sources.

Basic Settings

• Fast Period: The lookback period for the fast Gaussian filter.
• Slow Period: The lookback period for the slow Gaussian filter.
• Signal Period: The lookback period for the signal line smoothing.
• Fast/Slow/Signal Poles: Determines the number of poles (1 to 4) for each respective filter stage, affecting the sharpness and lag of the output.

Signal Settings

• Signal type: Switches between Zero Cross (MACD vs. 0) and Signal Cross (MACD vs. Signal line).

UI Options

• Color bars?: Enables or disables candle coloring based on the indicator's state.
• Show signals?: Toggles the visibility of "L" and "S" plot shapes on the chart.

Moving Average Inputs

• Kaufman/AMA Parameters: Specific tuning parameters for the Kaufman and Adaptive Moving Average source options.

FAQ

How do I use the Gaussian Filter MACD?

You can use it just like a standard MACD to spot momentum shifts, but with the added benefit of reduced lag and improved smoothing via the pole settings.

What is the difference between the number of poles?

Increasing the number of poles increases the steepness of the filter's cutoff (removing more noise), but typically increases lag slightly. However, Gaussian filters maintain a much better lag-to-smoothing ratio than standard EMAs.

How can I access this indicator?

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