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 Forums ›› Technically Speaking ›› Strategy (System) Design ›› Low Pass vs SMA

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 luckyputanski   Registered: Jul 2011 Posts: 337 09-16-12 11:42 AM I'm trying to compare effectiveness of simple moving average with low pass filter suggested by jcl. Code for his low pass filter: var smoothF(int period) { return 2./(period+1); } var LowPass(var *Data,int Period) { var* LP = series(*Data,3); var a = smoothF(Period); var a2 = a*a; return LP[0] = (a-0.25*a2)*Data[0] + 0.5*a2*Data[1] - (a-0.75*a2)*Data[2] + 2*(1.-a)*LP[1] - (1.-a)*(1.-a)*LP[2]; } First, I'd like to make sure that my spreadsheet calculates things properly. First three closing prices are: 17.76, 17.83, 17.86. In order to calculate low pass filter for last bar, I need low pass value for previous bar and a bar before. So first two LP values are simply security prices, then third value is calculated as in picture. Did I make a mistake somewhere? lp.png This has been downloaded 221 time(s). Edit/Delete • Quote • Complain
 panzerman   Registered: Aug 2006 Posts: 268 09-16-12 12:35 PM Look up work of John Ehlers if you are interested on low pass and band pass filters. Now, a filter is just an indicator and not a complete trading system or methodoligy, and an SMA is a lowpass filter. Also, it doesn't really matter what parameters you choose. When you back test, you will find performance of all the moving average indicators about the same (i.e. not too impressive.) Edit/Delete • Quote • Complain
 luckyputanski   Registered: Jul 2011 Posts: 337 09-16-12 12:36 PM Quote from panzerman: Look up work of John Ehlers if you are interested on low pass and band pass filters. Now, a filter is just an indicator and not a complete trading system or methodoligy, and an SMA is a lowpass filter. Also, it doesn't really matter what parameters you choose. When you back test, you will find performance of all the moving average indicators about the same (i.e. not too impressive.) Whether SMA or LP is a trading system or not, is another story. JCL claims that low pass is much more effective than SMA and that's what I'm trying to establish in this thread. Thanks for suggestions about read up. Edit/Delete • Quote • Complain
 stevegee58   Registered: Feb 2004 Posts: 2405 09-16-12 02:21 PM Actually SMA and EMA are both low pass filters too. The low pass filter jcl posted is a 2 pole filter. Edit/Delete • Quote • Complain
 luckyputanski   Registered: Jul 2011 Posts: 337 09-16-12 02:35 PM Quote from stevegee58: Actually SMA and EMA are both low pass filters too. The low pass filter jcl posted is a 2 pole filter. Yes, SMA is a low pass filter too. That's I'm looking to replace SMA with filter posted by jcl, but so far I can't see any advantage. Edit/Delete • Quote • Complain
 stevegee58   Registered: Feb 2004 Posts: 2405 09-16-12 02:40 PM The advantage is less lag. You only see it when you put a regular MA and the LPF on the chart with price. Edit/Delete • Quote • Complain
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