Price Simplification

Price Simplification runs the Ramer-Douglas-Peucker (RDP) algorithm — a curve-simplification method borrowed from cartography — across a window of price data, keeping only structurally significant points and connecting them into a clean zigzag skeleton of the market. Significance is measured against an ATR-scaled threshold, so what counts as meaningful adapts automatically to each market's volatility.

How to Trade the Price Simplification?

• Segment slope: the dominant trend at a glance — rising segments in uptrends, falling in downtrends, alternation in ranges.
• Structural pivots: the retained points mark genuine higher highs and lower lows, clarifying support, resistance, and consolidation geometry without candle noise.
• Sensitivity as style: a lower ATR Multiplier catches smaller swings for short-term work; a higher one keeps only major turns for position trading and macro trend analysis.
• Extended last segment: an optional dashed projection of the final segment's slope — a structural momentum compass for judging whether price still agrees with the prevailing move, not a prediction.

Because it isolates pure geometry, the tool slots equally into discretionary structure trading and systematic frameworks — market structure breaks, order block analysis, breakout setups, trend-following.

Price Simplification Settings

• Window Size: the span of bars fed to the algorithm — go larger for big-picture structure, smaller for near-term detail.
• ATR Multiplier: simplification sensitivity; higher values mean fewer segments and stronger filtering.
• ATR Length: the volatility measurement behind the adaptive threshold.
• Extend Last Segment: toggles the dashed projection, which picks up one bar beyond the last kept point and extends its slope forward.
• Line Color / Line Width: appearance controls.

Frequently Asked Questions

Does Price Simplification repaint?

Yes, by design: the calculation runs on a rolling historical window, so segments display retrospectively and can adjust as new bars form and the window shifts. Use it as a structural map rather than a signal printer.

How is it different from a classic ZigZag?

A classic ZigZag flips direction whenever price retraces by a set threshold. RDP instead asks which points matter to the overall shape, recursively measuring perpendicular distance across the window — a volatility-aware answer to the same question.

How can I try it?

Free on the LuxAlgo Library — and from this page you can run it inside Quant, LuxAlgo's AI, to see how different window and multiplier combinations reshape the structure.