NEW:
ADVANCED
TRADESTATION TECHNIQUE
NonAvgSmoothing
NonAvgSmoothing is quite a simple approach, similar to the Exponential MA, with the only difference in the formula that it uses the previous price, instead of the previous moving average value. This is why it is called a Non-Averaging Smoothing.
NonAvgSmoothing = Price x Alpha + PreviousPrice x (1 - Alpha)
In the chart displayed below, A NonAvgSmoothing indicator is used, with a parameter of 4, to be in line with Ehler's indicator also calculated over the last 4 bars. The NonAvgSmoothing is closer to the original price, and is marginally better correlated to next bar's price.
Nota bene: It must however be kept in mind that current price is often the best predictor for next bar's price, hence no need for any complex indicator, if that was the only objective. If one wants to smooth prices, i.e. remove noise, one almost inevitably adds a certain amount of lag in the indicator. Choosing the best compromise between noise reduction and predictive value remains the trader's decision.
