Theory :
John Ehlers describes what he calls the nonlinear Kalman filter in the following way :
- Take EMA of price (better, a 3 Pole filter).
- Take the difference (delta) between Price and its EMA.
- Take an EMA of delta (or a 3 Pole filter):
- Smoothing will help reduce whipsaws.
- Ideally, smoothing introduces no major trend mode lag because delta is detrended.
- Add the smoothed delta to EMA for a zero lag curve.
- Add 2*(smoothed delta) to EMA for a smoother predictive line.
In order to add signals other than simple slope direction change, in this version you can chose 3 types of color changes :
- color change on slope
- color change on outer (floating) levels cross
- color change on middle (floating) level (sort of a “zero line”) cross
Usage :
You can use the color changes as signals
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