Ehlers Smoothed Adaptive Momentum

The Ehlers Smoothed Adaptive Momentum indicator is a technical tool that aims to identify market momentum by dynamically adjusting its lookback period to the dominant cycle of the price data. By combining adaptive period calculations with advanced smoothing techniques, it provides a responsive yet filtered oscillator that helps traders identify trend shifts with reduced lag.

Usage

The Usage section describes how the script can be used for identifying entry and exit points. The indicator oscillates around a center zero line:

• Bullish Signal: A crossover above the zero line suggests growing positive momentum. Traders often look for this as a signal to buy on the next bar's open.
• Bearish Signal: A crossunder below the zero line suggests increasing negative momentum. Traders often look for this as a signal to sell or exit long positions on the next bar's open.
• Trend Strength: The distance from the zero line can indicate the strength of the current momentum.
• Bar Coloring: When enabled, the indicator colors the chart bars based on the oscillator's position and direction, providing a visual cue for the current trend state.

It is recommended to use this indicator in conjunction with other filtering tools or price action analysis to avoid false signals in choppy market conditions.

Details

The Ehlers Smoothed Adaptive Momentum (SAM) is based on the digital signal processing concepts developed by John Ehlers. The script calculates a "dominant cycle" using a Hilbert Transform approach, which allows the momentum calculation to adapt to changing market periodicities.

The process involves:

1. Smoothing the input source to remove high-frequency noise.
2. Calculating In-Phase and Quadrature components to determine the instantaneous phase and period.
3. Applying a SuperSmoother filter to the adaptive momentum to ensure the output is clean and usable for signal generation.

Settings

• Source: The price data used for the calculation (default is HL2).
• Alpha: The factor used for the initial smoothing of the price data.
• Cutoff: Determines the frequency response of the SuperSmoother filter applied to the final momentum value.
• Enable Bar Colors: Toggles the coloring of price bars based on the momentum direction and trend strength.

FAQ

How do I use the zero-line crossovers?

A crossover above zero indicates a shift to bullish momentum, while a crossunder below zero indicates a shift to bearish momentum.

What makes this different from standard Momentum?

Unlike a standard momentum indicator that uses a fixed lookback period, this version adjusts its period based on the market's current cycle, making it more responsive to changing volatility.

How can I access Ehlers Smoothed Adaptive Momentum?

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