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Technical indicator Trend Filter is an oscillator that recognizes trends and flat market areas without redrawing signals. This tool is another variation on the topic of the oscillator, but unlike traditional filters, its main task is to display trend and flat movements without specifying overbought and oversold zones.
The main advantage of the Trend Filter indicator is that it does not redraw after closing the bar. That is, if the filter has already begun to show upward dynamics, then it is sure of it.
The Trend Filter indicator is generally intuitive: the yellow line is the active phase of the trend in the direction of the indicator, the green is the passive phase of the uptrend or flat, the red is the passive phase of the downtrend or flat.
Indicator Settings
The indicator’s calculations are based on the moving average; therefore, its settings govern it precisely:
N_Bars - indicator period
MA_Period - degree of smoothing the moving average.
Indicator signals
Yellow Line. This line is formed during the trend movement and shows the active phase of the trend. It moves from the lower border of the Trend Filter indicator window towards its upper border and vice versa. At these edges, it transforms into a green (at the upper border) or red (at the lower border) line.
Red Line. It can be seen at the very bottom of the indicator window and indicates the formation of a passive flat phase or the beginning of a downtrend.
Green Line. The indicator draws it at the upper border of its working window. Its appearance indicates that a passive phase of an uptrend is beginning to form or its lateral movement is beginning.
When assessing the state of the market, the Trend Filter algorithm displays the results of this assessment as a line that changes color in accordance with the current market trend. A change in trend also helps to identify the slope of the indicator line. So, if it is tilted down - quotes are reduced, up - their growth is observed. Therefore, if the bar closes, and the indicator shows a growing trend, then the algorithm is sure of it and shows exactly the current and not the past trend.
Conclusion
You can trade with the Trend Filter indicator with any currency instrument on any timeframe. It is not recommended to use it as a separate tool, since it only shows the direction of the trend, without indicating the approximate possible entry point into the market. Combining it with traditional-style oscillators, you can get a good trading result.
The Trend Filter indicator is very simple visually, but very interesting to work with. It is universal and will help the trader to make significant profits in combination with any other tools or trading systems.
