Ehlers Predictive Moving Average

The Ehlers Predictive Moving Average indicator provides a leading signal for trend direction by utilizing specialized weighted moving averages to anticipate price action and significantly reduce lag compared to traditional moving averages.

Usage

The Usage section describes how the script can be used to identify market momentum and potential entry or exit points. Traders typically use this tool to stay ahead of trend changes by observing the relationship between the "Predict" line and the "Trigger" line.

• Bullish Trend: When the indicator line turns green, it suggests that the "Predict" line has crossed above the "Trigger" line, indicating upward momentum.
• Bearish Trend: When the indicator line turns red, it suggests that the "Predict" line has crossed below the "Trigger" line, indicating downward momentum.
• Bar Coloring: The script includes an optional feature to color the price bars based on the current signal, allowing for easier trend visualization directly on the candlesticks.

Details

The Ehlers Predictive Moving Average was originally introduced by John Ehlers in his book Rocket Science For Traders (page 212). The script is designed to function as a leading indicator by applying a specific mathematical approach to Weighted Moving Averages (WMA).

The calculation involves a 7-period WMA applied to the price source, followed by a second 7-period WMA applied to the first result. The "Predict" line is then calculated by doubling the first WMA and subtracting the second ($2 \times WMA1 - WMA2$). Finally, a 4-period WMA is applied to the Predict line to create the "Trigger" line. This specific combination is engineered to project price movement forward, offering a more responsive alternative to standard trend-following tools.

Settings

• Source: Determines the price data used for the calculations (e.g., HL2, Close, Open).
• Resolution: Allows the user to calculate the indicator based on a different timeframe than the current chart.
• Allow Repainting?: Toggles whether the indicator should calculate based on real-time data updates or strictly on closed bars to prevent repainting.
• Allow Bar Color Change?: Enables or disables the coloring of price candles based on the bullish or bearish state of the indicator.

FAQ

How does this differ from a standard Moving Average? Unlike standard SMAs or EMAs which are lagging indicators, the Ehlers Predictive Moving Average uses a specific multi-step WMA calculation designed to lead price action and reduce the delay inherent in traditional trend-following tools.

What is the best way to interpret the signals? The most common interpretation is to look for crossovers. A crossover where the Predict line moves above the Trigger line is bullish, while a crossunder is bearish.

How do I access the Ehlers Predictive Moving Average? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.