Kalman Adjusted Average True Range [BackQuant]

Kalman Adjusted Average True Range [BackQuant]
A volatility-aware trend baseline that fuses a Kalman price estimate with ATR “rails” to create a smooth, adaptive guide for entries, exits, and trailing risk.

Built on my original Kalman
This indicator is based on my original Kalman Price Filter:

That core smoother is used here to estimate the “true” price path, then blended with ATR to control step size and react proportionally to market noise.

What it plots

• Kalman ATR Line the main baseline that turns up/down with the filtered trend.
  
• Optional Moving Average of the Kalman ATR a secondary line for confluence (SMA/Hull/EMA/WMA/DEMA/RMA/LINREG/ALMA).
  
• Candle Coloring (optional) paint bars by the baseline’s current direction.
  

Why combine Kalman + ATR?

• Kalman reduces measurement noise and produces a stable path without the lag of heavy MAs.
  
• ATR rails scale the baseline’s step to current volatility, so it’s calm in chop and more responsive in expansion.
  
• The result is a single, intelligible line you can trade around: slope-up = constructive; slope-down = caution.
  

How it works (plain English)

• Each bar, the Kalman filter updates an internal state (tunable via Process Noise, Measurement Noise, and Filter Order) to estimate the underlying price.
  
• An ATR band (Period × Factor) defines the allowed per-bar adjustment. The baseline cannot “jump” beyond those rails in one step.
  
• A direction flip is detected when the baseline’s slope changes sign (upturn/downturn), and alerts are provided for both.
  

Typical uses

• Trend confirmation Trade in the baseline’s direction; avoid fading a firmly rising/falling line.
  
• Pullback timing Look for entries when price mean-reverts toward a rising baseline (or exits on tags of a falling one).
  
• Trailing risk Use the baseline as a dynamic guide; many traders set stops a small buffer beyond it (e.g., a fraction of ATR).
  
• Confluence Enable the MA overlay of the Kalman ATR; alignment (baseline above its MA and rising) supports continuation.
  

Inputs & what they do
Calculation

• Kalman Price Source which price the filter tracks (Close by default).
  
• Process Noise how quickly the filter can adapt. Higher = more responsive (but choppier).
  
• Measurement Noise how much you distrust raw price. Higher = smoother (but slower to turn).
  
• Filter Order (N) depth of the internal state array. Higher = slightly steadier behavior.
  

Kalman ATR

• Period ATR lookback. Shorter = snappier; longer = steadier.
  
• Factor scales the allowed step per bar. Larger factors permit faster drift; smaller factors clamp movement.
  

Confluence (optional)

• MA Type & Period compute an MA on the Kalman ATR line, not on price.
  
• Sigma (ALMA) if ALMA is selected, this input controls the curve’s shape. (Ignored for other MA types.)
  

Visuals

• Plot Kalman ATR toggle the main line.
  
• Paint Candles color bars by up/down slope.
  
• Colors choose long/short hues.
  

Signals & alerts

• Trend Up baseline turns upward (slope crosses above 0).
  Alert: “Kalman ATR Trend Up”
  
• Trend Down baseline turns downward (slope crosses below 0).
  Alert: “Kalman ATR Trend Down”
  

These are state flips, not “price crossovers,” so you avoid many one-bar head-fakes.

How to start (fast presets)

• Swing (daily/4H) ATR Period 7–14, Factor 0.5–0.8, Process Noise 0.02–0.05, Measurement Noise 2–4, N = 3–5.
  
• Intraday (5–15m) ATR Period 5–7, Factor 0.6–1.0, Process Noise 0.05–0.10, Measurement Noise 2–3, N = 3–5.
  
• Slow assets / FX raise Measurement Noise or ATR Period for calmer lines; drop Factor if the baseline feels too jumpy.
  

Reading the line

• Rising & curving upward momentum building; consider long bias until a clear downturn.
  
• Flat & choppy regime uncertainty; many traders stand aside or tighten risk.
  
• Falling & accelerating distribution lower; short bias until a clean upturn.
  

Practical playbook

• Continuation entries After a Trend Up alert, wait for a minor pullback toward the baseline; enter on evidence the line keeps rising.
  
• Exit/reduce If long and the baseline flattens then turns down, trim or exit; reverse logic for shorts.
  
• Filters Add a higher-timeframe check (e.g., only take longs when the daily Kalman ATR is rising).
  
• Stops Place stops just beyond the baseline (e.g., baseline − x% ATR for longs) to avoid “tag & reverse” noise.
  

Notes

• This is a guide to state and momentum, not a guarantee. Combine with your process (structure, volume, time-of-day) for decisions.
  
• Settings are asset/timeframe dependent; start with the presets and nudge Process/Measurement Noise until the baseline “feels right” for your market.
  

Summary
Kalman ATR takes the noise-reduction of a Kalman price estimate and couples it with volatility-scaled movement to produce a clean, adaptive baseline. If you liked the original Kalman Price Filter (tradingview.com/script/3N2zym2w-Kalman-Price-Filter-BackQuant/), this is its trend-trading cousin purpose-built for cleaner state flips, intuitive trailing, and confluence with your existing