Arnaud Legoux Moving Average (ALMA)

Description:

The Arnaud Legoux Moving Average (ALMA) is designed to reduce lag and increase responsiveness while maintaining a smooth curve. ALMA achieves this by applying a Gaussian filter to the moving average, allowing traders to identify trends and reversals more quickly than with traditional moving averages. It is particularly useful for highlighting the start of new trends and the end of existing ones in a clear and concise manner.

Input Parameters:

• Length: Number of periods used in the calculation.
• Sigma: Not to be confused with the Greek letter for summation, this represents the filter’s range. The default value is 6, and lower values will make the ALMA indicator less reactive to price changes
• Offset: The offset value is used to access the data of any candle or indicator with reference to the current candle, to access the current candle data it will use the offset value of "0", to access previous candle data "-1" offset value will be used, access data of previous to previous "-2" will be used.

Use Cases:

1. Trend Identification: ALMA can help traders quickly identify the beginning and end of trends. When the price moves above the ALMA, it can indicate the start of an uptrend; conversely, when it falls below the ALMA, a downtrend may be beginning.
2. Price Reversals: Due to its unique calculation, ALMA can signal potential price reversals earlier than traditional moving averages. Traders look for crossovers between the ALMA and price as early indications of reversals.
3. Dynamic Support and Resistance: ALMA can act as a dynamic level of support in an uptrend and resistance in a downtrend. Prices approaching the ALMA from below may face resistance, while prices approaching from above may find support.

Do you want to learn more? Check out our Learning Center Article.

**