The Zero Lag indicator is a powerful VertexFX indicator based upon the EMA indicator (attempts) to eliminate lag from the EMA. This indicator is based on the concept of Kalman filtering (and thus falls in the category of Kalman filters).
The smoothing constant ALPHA defines the amount of lag to be reduced. For example, when ALPHA is 0.33, the lag is 2 bars. It is responsive for intra-day trading on cyclical markets where the lag can be reduced.
In the first step, the price is smoothed using WMA. Then in the next step we (attempt to) remove the lag by filtering the momentum. Finally, this is smoothed once again using the ALPHA smoothing to derive the Zero Lag indicator.
BUY - Enter BUY trade when indicator color turns BLUE, and High of current bar is less than High of previous bar, and close of current bar is in upper half of the range. Exit BUY trade when indicator color turns RED.
SELL - Enter SELL trade when indicator color turns RED, and Low of current bar is greater than Low of previous bar, and close of current bar is in lower half of the range. Exit SELL trade when indicator color turns BLUE.
The smoothing constant ALPHA defines the amount of lag to be reduced. For example, when ALPHA is 0.33, the lag is 2 bars. It is responsive for intra-day trading on cyclical markets where the lag can be reduced.
In the first step, the price is smoothed using WMA. Then in the next step we (attempt to) remove the lag by filtering the momentum. Finally, this is smoothed once again using the ALPHA smoothing to derive the Zero Lag indicator.
BUY - Enter BUY trade when indicator color turns BLUE, and High of current bar is less than High of previous bar, and close of current bar is in upper half of the range. Exit BUY trade when indicator color turns RED.
SELL - Enter SELL trade when indicator color turns RED, and Low of current bar is greater than Low of previous bar, and close of current bar is in lower half of the range. Exit SELL trade when indicator color turns BLUE.
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