Description
The Ehlers' Roofing Filter is an expansion on Ehlers Super Smoother Filter, both being smoothing techniques developed by John F. Ehlers, based on aerospace analog filters. This filter aims at reducing noise in price data, which appears to be stronger as the high-to-low price swings increase especially when chart is plotted for greater time intervals.
In Super Smoother Filter, regardless of the time frame used, all waves having cycles of less than 10 bars are considered noise (customizable via input parameters). The Roofing Filter uses this principle, however, it also creates a so-called "roof" by eliminating wave components with long periods which are perceived as "spectral dilation" (by default, at least 48 bars). Thus, the filter only passes those spectral components whose periods are between 10 and 48 bars. This technique noticeably reduces indicator lag and also helps assess turning points more accurately.
Input Parameters
| Parameter | Description |
|---|---|
price
|
The price to which the filter is applied. |
cutoff length
|
Defines the minimum cycle length in bars. Cycles with lesser lengths will be considered noise and eliminated. |
|
|
Defines the maximum cycle length in bars. Cycles with greater lengths will be considered spectral dilation and eliminated. |
Plots
| Plot | Description |
|---|---|
RoofingFilter
|
The Ehlers' Roofing Filter. |
ZeroLine
|
The zero level. |
Further Reading
1. "Predictive Indicators for Effective Trading Strategies" by John F. Ehlers. Technical Analysis of Stocks & Commodities, January 2014.
2. "The Quotient Transform" by John F. Ehlers. Technical Analysis of Stocks & Commodities, August 2014.
Example*
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.