Kaufman Trend Strength Signal

█ Overview

Kaufman Trend Strength Signal is an advanced trend detection tool that decomposes price action into its underlying directional trend and localized oscillation using a vector-based Kalman Filter.
By integrating adaptive smoothing and dynamic weighting via a weighted moving average (WMA), this indicator provides real-time insight into both trend direction and trend strength — something standard moving averages often fail to capture.

The core model assumes that observed price consists of two components:
(1) a directional trend, and
(2) localized noise or oscillation.
Using a two-step Predict & Update cycle, the filter continuously refines its trend estimate as new market data becomes available.





█ How It Works

This indicator employs a Kalman Filter model that separates the trend from short-term fluctuations in a price series.

• [] Predict & Update Cycle: With each new bar, the filter predicts the price state and updates that prediction using the latest observed price, producing a smooth but adaptive trend line.
  [] Trend Strength Normalization: Internally, the oscillator component is normalized against recent values (N periods) to calculate a trend strength score between -100 and +100.
  (Note: The oscillator is not plotted on the chart but is used for signal generation.)
  [] Filtered MA Line: The trend component is plotted as a smooth Kalman Filter-based moving average (MA) line on the main chart.
  [] Threshold Cross Signals: When the internal trend strength crosses a user-defined threshold (default: ±60), visual entry arrows are displayed to signal momentum shifts.
  

█ Key Features

• [] Adaptive Trend Estimation: Real-time filtering that adjusts dynamically to market changes.
  [] Visual Buy/Sell Signals: Entry arrows appear when the trend strength crosses above or below the configured threshold.
  
• Built-in Range Filter: The MA line turns blue when trend strength is weak (|value| < 10), helping you filter out choppy, sideways conditions.
  

█ How to Use

• [] Trend Detection:
   • Green MA = bullish trend
   • Red MA = bearish trend
   • Blue MA = no trend / ranging market
  [] Entry Signals:
   • Green triangle = trend strength crossed above +Threshold → potential bullish entry
   • Red triangle = trend strength crossed below -Threshold → potential bearish entry
  
  

█ Settings

• [] Entry Threshold: Level at which the trend strength triggers entry signals (default: 60)
  [] Process Noise 1 & 2: Control the filter’s responsiveness to recent price action. Higher = more reactive; lower = smoother.
  [] Measurement Noise: Sets how much the filter "trusts" price data. High = smoother MA, low = faster response but more noise.
  [] Trend Lookback (N2): Number of bars used to normalize trend strength. Lower = more sensitive; higher = more stable.
  
• Trend Smoothness (R2): WMA smoothing applied to the trend strength calculation.
  

█ Visual Guide

• [] Green MA Line → Bullish trend
  [] Red MA Line → Bearish trend
  [] Blue MA Line → Sideways/range
  [] Green Triangle → Entry signal (trend strengthening)
  
• Red Triangle → Entry signal (trend weakening)
  

█ Best Practices

• [] In high-volatility conditions, increase Measurement Noise to reduce false signals.
  [] Combine with other indicators (e.g., RSI, MACD, EMA) for confirmation and filtering.
  
• Adjust "Entry Threshold" and noise settings depending on your timeframe and trading style.
  

❗ Disclaimer

This script is provided for educational purposes only and should not be considered financial advice or a recommendation to buy/sell any asset.
Trading involves risk. Past performance does not guarantee future results.
Always perform your own analysis and use proper risk management when trading.