The Adaptive Laguerre is based on the Laguerre filter, described by John Ehlers in his paper “Time Warp – Without Space Travel”. It applies a variable gamma factor, based on how well the filter is tracking previous price movement. As with other adaptive moving averages, the Adaptive Laguerre tracks trending markets closely but will see less changes in range-bound markets.
Indicator Description
The Adaptive Laguerre filter allows for an adjustment of the simple Laguerre filter. When price moves away from the filter, it becomes faster. When price moves sideward, the filter gets slower. Accordingly, this indicator belongs to the same class of moving average as the Kaufman Adaptive Moving Average (KAMA). It similar to the Volatility Index Dynamic Average (VIDYA) developed by Tushar Chande. The Adaptive Laguerre filter is smoother than the VIDYA and will adjust slower to price action after consolidations.
Ehlers uses the bar center (H+L)/2 as input series. In NinjaSpeak this is the “Median”. NinjaTrader allows for setting this as default, however, it can then not be changed anymore. Accordingly, this indicator is not preset to “Median”. You may apply the change via “Input Series” in the indicator dialogue box when applying the indicator to the chart. The reason is that other indicators call the Ehlers indicators to perform calculations on the bar high/low, such as the Gann HiLo Activator.
Ehlers introduces the background for the development of the Laguerre filters as follows: “One of the most frustrating aspects of technical analysis is trying to avoid whipsaw trades.” Smoothing of moving averages to avoid whipsaws, the resulting lag often renders signals to be ineffective. Accordingly, the dilemma is to strike a balance between smoothing and the resulting lag. In the article, Ehlers then introduce a new tool to address the smoothing vs. lag problem more effectively.
Other Library indicators
This category also includes the Laguerre Filter, Laguerre RSI, Butterworth Filter, Coral Filter, Gaussian Filter, Distant Coefficient Filter, MAAF and the Supersmoother Filter. You may also review our indicators from the moving averages or the trend analysis categories, such as the Directional Movement Index, Zerolag TEMA, Zerolag HATEMA, Triple Weighted Moving Average, Sine WMA, Range Weighted Moving Average or the Efficiency Ratio. The Indicator Spotlight newsletter furthermore discussed the Kaufman Efficiency Ratio.
Finally, make sure to check out our Indicator Spotlights on Relative Volume and Relative Ranges.
The Adaptive Laguerre Filter is available for NinjaTrader 8.
