Precision Trend Analysis
Trend identification using the difference between two high-pass filters.
Usage
Use as a high-precision trend indicator that applies DSP filtering to remove cycle noise before measuring trend direction, giving fewer but more reliable trend signals.
Background
Ehlers Precision Trend analysis applies a roofing-filter style preprocessing to price before computing the trend indicator, removing the cyclical component that causes premature trend reversals in standard indicators. The result is a trend signal that changes state only when the genuine trend direction changes.
Parameters
length1(default: 250): First HighPass filter periodlength2(default: 40): Second HighPass filter period
Formula
[ HP1 = HighPass(Price, Length1) ] [ HP2 = HighPass(Price, Length2) ] [ Trend = HP1 - HP2 ] [ ROC = \frac{Length2}{6.28} \cdot (Trend - Trend_{t-1}) ]