Three Pole Butterworth Filter is a powerful VertexFX Indicator based upon Digital Signal Processing (DSP) concepts for identifying market trends.
DSP is used to eliminate noise (whipsaws) in price and reduce lag (frequency delay) as much as possible to get accurate and fast signals. This indicator uses the Butterworth filter logic which is a low-pass filter. The number of poles is the degree of the low-pass filter.
We first calculate the filter based upon Median price. Then 4th order (3rd degree) of smoothing is applied to derive the indicator value.
This indicator successfully eliminates whipsaws without introducing lag, which helps it identify excellent trading opportunities. Certain markets respond better to Three Pole Butterworth Filter compared to the Two Pole Butterworth filter due to the nature of the whipsaws and the characteristics of the market. Therefore a trader must identify the most suitable degree of the Butterworth filter for each market.
BUY - Place Buy position when the price closes above the indicator. Place stop-loss at the nearest swing low.
SELL - Place Sell position when the price closes below the indicator. Place stop-loss at the nearest swing high.
DSP is used to eliminate noise (whipsaws) in price and reduce lag (frequency delay) as much as possible to get accurate and fast signals. This indicator uses the Butterworth filter logic which is a low-pass filter. The number of poles is the degree of the low-pass filter.
We first calculate the filter based upon Median price. Then 4th order (3rd degree) of smoothing is applied to derive the indicator value.
This indicator successfully eliminates whipsaws without introducing lag, which helps it identify excellent trading opportunities. Certain markets respond better to Three Pole Butterworth Filter compared to the Two Pole Butterworth filter due to the nature of the whipsaws and the characteristics of the market. Therefore a trader must identify the most suitable degree of the Butterworth filter for each market.
BUY - Place Buy position when the price closes above the indicator. Place stop-loss at the nearest swing low.
SELL - Place Sell position when the price closes below the indicator. Place stop-loss at the nearest swing high.
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