The ALMA indicator was developed as an alternative to conventional moving averages, such as the simple, weighted and triangular moving averages. Specifically, Arnaud Legoux sought to create a smooth moving average without scarifying responsiveness. A post discussing different approaches for assigning weight to moving averages, specifically contrasting the ALMA indicator to the SMA, WMA and TMA was discussed in our Indicator Spotlight (with video).
Indicator Description
The ALMA indicator is a linear filter whose coefficients are determined using a Gaussian distribution. Legoux then adds an offset towards the end of the lookback period. Finally, a sigma parameter will change the shape of the filter. One may thereby strike a balance between smoothing and responsiveness as per user preference.
Other Library Indicators
Other that the Arnaud Legoux Moving Average, this category includes the DWMA, Holt EMA, Exponential Hull Moving Average, Moving Average Wave, MA Cross, Sine WMA, Tillson T3 and the Trigger Lines. Our Indicator Spotlight specifically looked at the Trigger Lines Trend Bias, comparing the Cross vs. Thrust trend definition.
You may also want to review our Trend Analysis and Trend Filters, such as the ADX, ADXVMA, Directional Movement Index (DMI), Efficiency Ratio, Butterworth Filter, Gaussian Filter, Laguerre Filter, Rainbow Filter, Supersmoother Filter and the Supertrend indicator.
The ALMA indicator may be used in combination with other tools for technical analysis, such as channel indicators, momentum oscillators, support / resistance levels and volume analysis. You may for example review the Commodity Channel Index, Donchican Channel or the Squeeze Channel. A Donchian Channel Strategy was reviewed in our Indicator Spotlight, as was the Squeeze Momentum setup. Furthermore, the Indicator Spotlight looked at how the TDI indicator utilizes the RSI in three timeframes.
To locate key support / resistance, you may consider using Daily Pivot Levels as discussed in our in our Indicator Spotlight. A number of Pivot indicators are available from the Session Tools category, including the Daily Pivots, Weekly Pivots, Monthly Pivots and the N-Monthly Pivots.
For volume analysis you may consider our Relative Volume indicator. Instruments that lack reliable volume information (FX/Crypto currencies) may be analyzed using Relative Ranges as discussed here.
Finally, you may consider managing positions by using the Chandelier Stop. Other trailing stop indicators were discussed in our Spotlight Newsletter, namely the ATR Trailing Stop, the Chande Kroll and the Wilder Volatility Stop.
The ALMA indicator is available for NinjaTrader 8.