Dancing with the Trend

Filtering the Noise III

by Greg Morris

First of all, I must apologize for my lack of creativity for these article titles.  The previous two “Filtering the Noise” and “Filtering the Noise II” were about moving averages and suggesting a better way to use a relationship between two moving averages, similar to the ubiquitous MACD.  In this creatively named article I will attempt to explain my process for finding the shorter-term average using detrending.  If you recall from the previous articles, once you have the shorter-term average, you then know the longer term one and the signal value.  Instead of rewriting Read More 

Dancing with the Trend

Filtering the Noise II

by Greg Morris

The first article of Filtering the Noise dealt with smoothing the data with moving averages.  Here I want to discuss a really popular concept popularized by an indicator called Moving Average Convergence Divergence or MACD.  MACD is a concept using two exponential averages developed by Gerald Appel. It was originally developed as the difference between the 12 and 26 day exponential averages; the same as a moving average crossover system with the periods of the two averages being 12 and 26. The resulting difference, called the MACD line, is then smoothed with a nine-day Read More 

Dancing with the Trend

Filtering the Noise

by Greg Morris

I have mentioned many times I that I basically only work with daily market data.  I do not have the personality to deal with intraday data and weekly data is only good for long term use.   I do have a few weekly data indicators that I use as overlays to my trend model, but the bulk of then are daily.  One of the concepts I think you must deal with when using daily data is to come up with a method that removes the noise.  Noise in this instance is very short term fluctuations in price. One of the most popular is the moving average; and it comes in many Read More