Ehlers Roofing Filter Study

By Samantha Baltodano

TL;DR:

The Ehlers Roofing Filter is a tool that helps make sense of stock market data by removing the random fluctuations that make it difficult to see the trends and patterns.

It is an expansion on the Ehlers Super Smoother Filter and aims to reduce noise in price data. This makes it easier to identify trends and patterns in the market, make more accurate predictions, and eliminate false signals.

The Roofing Filter only keeps the trends with periods between 10 and 48 bars, unlike the Super Smoother Filter which only considers any trends that last for less than 10 bars as noise. This technique helps to reduce the lag in the indicator, and also makes it easier to predict turning points more accurately.

What Is the Ehlers Roofing Filter Study?

The Ehlers' Roofing Filter expands on the Ehlers Super Smoother Filter - both of these are smoothing techniques developed by John F. Ehlers, based on aerospace analog filters. 

Luckily, you won’t need to understand aerospace analog filters to use this indicator!

This filter aims to reduce noise in price data. This makes it easier to identify trends and patterns in the market, make more accurate predictions about future price movements, and eliminate false signals, which can lead to more informed trading decisions. This is especially useful when looking at long-term data, where there may be a lot of noise that makes it difficult to see what's really happening in the market. 

In simple words, The Ehlers Roofing Filter is a tool that helps to clean the stock market data by removing the random fluctuations that make it difficult to see the trends and patterns, which makes it easier to make informed decisions about investments.

Now, I bet you’re asking yourself, “how is this different from the Super Smoother Filter?”

Well, in the Super Smoother Filter, regardless of the time frame you’re analyzing, any trends that last for less than 10 bars (or days) are considered noise. This will apply for both upward and downward trends.

The Roofing Filter uses this same principle, but expands on it. How so?

You see, like the Super Smoother Filter, the trend must last for 10 bars or else it is considered noise. We might think of this as a minimum or a floor. 

Unlike the Super Smoothing Filter, it also creates a so-called "roof" or maximum by eliminating waves with long periods that are considered as "spectral dilation" (by default, at least 48 bars). This means that the filter only keeps the waves, or trends, with periods between 10 and 48 bars. 

This technique helps to reduce the lag in the indicator, and also makes it easier to predict turning points more accurately. In simpler terms, The Roofing Filter is a tool that helps to clean up stock market data by removing the noise and only keeping the important waves, which makes it easier to make informed decisions about investments.

Test The Roofing Filter

Great news! 

You can back test this exact strategy on historical data for any of your favorite symbols using TradingView. 

This strategy has already been built and all you have to do is log in and take it for a spin. You can access this indicator here.

If you’re new to back testing and to TradingView, don’t worry. I created a step-by-step guide you can follow to begin testing the Ehlers Roofing Filter.

Summary

• The Ehlers Roofing Filter is a smoothing technique developed by John F. Ehlers, based on aerospace analog filters, that aims to reduce noise in price data and make it easier to identify trends and patterns in the market.
• The filter is an expansion on the Ehlers Super Smoother Filter, and is useful when analyzing long-term data where there may be a lot of noise.
• In the Super Smoother Filter, any trends that last for less than 10 bars (or days) are considered noise, but the Roofing Filter also eliminates wave components with long periods (by default, at least 48 bars) to create a so-called "roof" and only pass on those spectral components whose periods are between 10 and 48 bars.
• This technique helps to reduce indicator lag and also helps assess turning points more accurately, making it a useful tool for making informed trading decisions.

Ehlers Roofing Filter is just one of many studies that Archaide automates. For a full list of strategies and studies available click here.

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