OPEN-SOURCE SCRIPT
Signal Moving Average [LuxAlgo]
Updated
The following script returns a moving average designed to be used as a signal line in a moving average crossover system. The moving average will diverge from the price during ranging markets and reach the value of a regular moving average during trending markets.
Settings
Usage
Moving average crossover strategies often rely on a "signal" line, a slower moving average used to determine a general trend. This signal line is paired with a faster moving average to filter out potential whipsaw trades that would have been given from crosses between the regular price and the signal line.
The proposed indicator will avoid crossing the price by diverging from it during more ranging periods, thus effectively reducing the number of crosses produced between the price and the signal line.
The color of the area between the price and the signal line is determined by the position of the price relative to the signal line, with a green color indicator a price superior to the signal line.
The color of the signal line, however, is taking into account whether market is trending or ranging, only changing once the market is trending.
The chart above shows the cumulated number of crosses between the price and the signal line (green) and a regular simple moving average of the same period (red) on AMD 15m, a lowered number of crosses can effectively reduce the impact of frictional costs introduced by whipsaw trades.
Settings
- Length: Moving average period
- Src: Source input of the indicator
Usage
Moving average crossover strategies often rely on a "signal" line, a slower moving average used to determine a general trend. This signal line is paired with a faster moving average to filter out potential whipsaw trades that would have been given from crosses between the regular price and the signal line.
The proposed indicator will avoid crossing the price by diverging from it during more ranging periods, thus effectively reducing the number of crosses produced between the price and the signal line.
The color of the area between the price and the signal line is determined by the position of the price relative to the signal line, with a green color indicator a price superior to the signal line.
The color of the signal line, however, is taking into account whether market is trending or ranging, only changing once the market is trending.
The chart above shows the cumulated number of crosses between the price and the signal line (green) and a regular simple moving average of the same period (red) on AMD 15m, a lowered number of crosses can effectively reduce the impact of frictional costs introduced by whipsaw trades.
Release Notes
Updated chartRelease Notes
Minor changesRelease Notes
Minor changes.Open-source script
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.
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All content provided by LuxAlgo is for informational & educational purposes only. Past performance does not guarantee future results.
Join our 150k+ community: discord.gg/lux
All content provided by LuxAlgo is for informational & educational purposes only. Past performance does not guarantee future results.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.