Smoothed Low-Pass Butterworth Filtered Median [AlphaAlgos]

Smoothed Low-Pass Butterworth Filtered Median

This indicator is designed to smooth price action and filter out noise while maintaining the dominant trend. By combining a Butterworth low-pass filter with a median-based smoothing approach, it effectively reduces short-term fluctuations, allowing traders to focus on the true market direction.

How It Works

• Median Smoothing: The indicator calculates the 50th percentile (median) of closing prices over a customizable period [len], making it more robust against outliers compared to traditional moving averages.
  
  Butterworth Filtering: A low-pass filter is applied using an approximation of the Butterworth formula, controlled by the Cutoff Frequency [cutoffFreq], helping to eliminate high-frequency noise while preserving trends.
  
  EMA Refinement: A 7-period EMA [emalen] is applied to further smooth the signal, providing a more reliable trend representation.
  

Features

• Trend Smoothing: Reduces market noise and highlights the dominant trend.
  
  Dynamic Color Signals: The EMA line changes color to indicate trend strength and direction.
  
  Configurable Parameters: Customize the median length, cutoff frequency, and EMA length to fit your strategy.
  
  Versatile Use Case: Suitable for both trend-following and mean-reversion strategies.
  

How to Use

• Bullish Signal: When the EMA is below the price and rising, indicating upward momentum.
  
  Bearish Signal: When the EMA is above the price and falling, signaling a potential downtrend.
  
  Reversal Zones: Monitor for trend shifts when the color of the EMA changes.
  

This indicator provides a clear, noise-free view of market trends, making it ideal for traders seeking improved trend identification and entry signals.