Range Filter

The Range Filter indicator filters minor price action to provide a clearer view of market trends by applying a volatility-based gating process directly to price movements.

Usage

The Usage section describes how the script can be used to identify trend direction and potential reversal points. The indicator functions by creating a dynamic price boundary; if the price exceeds this boundary, the filter updates its position, signaling a trend change.

• Trend Identification: When the filter line is green, it indicates an upward trend. When the filter line is red, it indicates a downward trend.
• Support and Resistance: The filter line acts as a trailing level of support during uptrends and resistance during downtrends.
• Visual Confirmation: High and low bands are plotted to display the price targets required to trigger a movement in the filter. Custom bar coloring is also provided to highlight trend strength based on price relationship to the filter.

Details

The Range Filter is inspired by the volatility filtering process found in the Quantitative Qualitative Estimation (QQE) indicator, but it is unique in that it applies this logic to price action rather than a smoothed RSI.

The execution follows a multi-step process:

1. Range Calculation: A smooth average price range is calculated based on a selected scale (such as ATR, Average Change, or Standard Deviation).
2. Filtering Logic: The script uses a gating mechanism. For "Type 1," the filter moves only when price exceeds the previous filter value by the calculated range. "Type 2" uses a stepped approach, moving the filter in discrete increments based on how many "ranges" the price has moved.
3. Smoothing: Optional smoothing can be applied to the range basis or the resulting filter changes to reduce noise and prevent premature signals in choppy markets.

Settings

General Settings

• Filter Type: Selects the calculation logic ("Type 1" for standard movement or "Type 2" for discrete stepped movement).
• Movement Source: Determines whether the filter reacts to high/low "Wicks" or "Close" prices.
• Range Size: A multiplier used to expand or contract the filter width.
• Range Scale: Defines the unit of measurement for the range (Points, Pips, Ticks, % of Price, ATR, Average Change, Standard Deviation, or Absolute).
• Range Period: The lookback period used for calculating ATR, Average Change, and Standard Deviation.

Smoothing Settings

• Smooth Range: Enables smoothing on the calculated range basis.
• Smoothing Period: The length of the EMA used to smooth the range.
• Average Filter Changes: Enables an averaging process specifically for the filter's output values.
• Number Of Changes To Average: Sets the number of filter updates to include in the moving average.

FAQ

How do I interpret the bar colors? The bar colors represent trend alignment. Bright colors indicate price moving in the direction of the filter trend, while faded colors suggest a temporary retracement or slowing momentum within the current trend.

What is the difference between Filter Type 1 and Type 2? Type 1 follows price more fluidly by updating the filter to the specific price point minus the range. Type 2 is more "quantized," moving the filter in fixed steps based on multiples of the range.

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