blackcat1402

[blackcat] L2 Ehlers Truncated BP Filter

Level: 2

Background

John F. Ehlers introuced Truncated BandPass ( BP ) Filter in Jul, 2020.

Function

In Dr . Ehlers' article “Truncated Indicators” in Jul, 2020, he introduces a method that can be used to modify some indicators, improving how accurately they are able to track and respond to price action. By limiting the data range, that is, truncating the data, indicators may be able to better handle extreme price events. A reasonable goal, especially during times of high volatility . John Ehlers shows how to improve a bandpass filter’s ability to reflect price by limiting the data range. Filtering out the temporary spikes and price extremes should positively affect the indicator stability. Enter a new indicator ——— the Truncated BandPass ( BP ) filter.

Cumulative indicators, such as the EMA or MACD , are affected not only by previous candles, but by a theoretically infinite history of candles. Although this effect is often assumed to be negligible, John Ehlers demonstrates in his article that it is not so. Or at least not for a narrow-band bandpass filter.

Bandpass filters are normally used for detecting cycles in price curves. But they do not work well with steep edges in the price curve. Sudden price jumps cause a narrow-band filter to “ring like a bell” and generate artificial cycles that can cause false triggers. As a solution, Ehlers proposes to truncate the candle history of the filter. Limiting the history to 10 bars effectively dampened the filter output and produced a better representation of the cycles in the price curve. For limiting the history of a cumulative indicator, John Ehlers proposes “Truncated Indicators,” John Ehlers takes us aside to look at the impact of sharp price movements on two fundamentally different types of filters: finite impulse response, and infinite impulse response filters. Given recent market conditions, this is a very well timed subject.

As demostrated in this script, Ehlers suggests “truncation” as an approach to the way the trader calculates filters. He explains why truncation is not appropriate for finite impulse response filters but why truncation can be beneficial to infinite impulse response filters. He then explains how to apply truncation to infinite impulse response filters using his bandpass filter as an example.


Key Signal

BPT --> Truncated BandPass ( BP ) Filter fast line
Trigger --> Truncated BandPass ( BP ) Filter slow line

Pros and Cons

100% John F. Ehlers definition translation, even variable names are the same. This help readers who would like to use pine to read his book.


Remarks

The 98th script for Blackcat1402 John F. Ehlers Week publication.


Readme

In real life, I am a prolific inventor. I have successfully applied for more than 60 international and regional patents in the past 12 years. But in the past two years or so, I have tried to transfer my creativity to the development of trading strategies. Tradingview is the ideal platform for me. I am selecting and contributing some of the hundreds of scripts to publish in Tradingview community. Welcome everyone to interact with me to discuss these interesting pine scripts.

The scripts posted are categorized into 5 levels according to my efforts or manhours put into these works.

Level 1 : interesting script snippets or distinctive improvement from classic indicators or strategy. Level 1 scripts can usually appear in more complex indicators as a function module or element.

Level 2 : composite indicator/strategy. By selecting or combining several independent or dependent functions or sub indicators in proper way, the composite script exhibits a resonance phenomenon which can filter out noise or fake trading signal to enhance trading confidence level.

Level 3 : comprehensive indicator/strategy. They are simple trading systems based on my strategies. They are commonly containing several or all of entry signal, close signal, stop loss, take profit, re-entry, risk management, and position sizing techniques. Even some interesting fundamental and mass psychological aspects are incorporated.

Level 4 : script snippets or functions that do not disclose source code. Interesting element that can reveal market laws and work as raw material for indicators and strategies. If you find Level 1~2 scripts are helpful, Level 4 is a private version that took me far more efforts to develop.

Level 5 : indicator/strategy that do not disclose source code. private version of Level 3 script with my accumulated script processing skills or a large number of custom functions. I had a private function library built in past two years. Level 5 scripts use many of them to achieve private trading strategy.
Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

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Kommentarer

Great! I've been waiting for this one. Thank You.
+1 Svara
Do you know why this doesn't work on FX currencies?
Svara