Gaussian Acceleration Array

8 sept

Indicators play a role in analyzing price action, trends, and potential reversals. Among many of these, velocity and acceleration have held a significant place due to their ability to provide insight into momentum and rate of change. This indicator takes the old calculation and tweaks it with gaussian smoothing and logarithmic function to ensure proper scaling.

A Brief on Velocity and Acceleration: The concept of velocity in trading refers to the speed at which price changes over time, while acceleration is the rate of change(ROC) of velocity. Early momentum indicators like the RSI and MACD laid foundation for understanding price velocity. However, as markets evolve so do we as technical analysts, we seek the most advanced tools.

The Acceleration/Deceleration Oscillator, introduced by Bill Williams, was one of the early attempts to measure acceleration. It helped gauge whether the market was gaining or losing momentum. Over time more specific tools like the "Awesome Oscillator"(AO) emerged, which has a set length on the datasets measured.

Gaussian Functions: Named after the mathematician Carl Friedrich Gauss, the Gaussian function describes a bell-shaped curve, often referred to as the "normal distribution." In trading these functions are applied to smooth data and reduce noise, focusing on underlying patterns.

The Gaussian Acceleration Array leverages this function to create a smoothed representation of market acceleration.

How does it work?

• This indicator calculates acceleration based the highs and lows of each dataset
  

• Once the weighted average for velocity is determined, its rate of change essentially becomes the acceleration
  

• It then plots multiple lines with customizable variance from the primary selected length
  

Practical Tips:

The Gaussian Acceleration Array offers various customizable parameters, including the sample period, smoothing function, and array variance. Experiment with these settings to tailor it to preferred timeframes and styles.

The color-coded lines and background zones make it easier to interpret the indicator at a glance. The backgrounds indicate increasing or decreasing momentum simply as a visual aid while the lines state how the velocity average is performing. Combining this with other tools can signal shifts in market dynamics.