Hodrick-Prescott filter [Jamallo]
(2025)
Intro
The Hodrick-Prescott (HP) filter is a tool originally developed by economists to remove short-term noise from data and reveal the underlying long-term trend — think of it like a moving average, but mathematically smarter.
Instead of just averaging recent prices, it solves for the smoothest possible trendline that still follows the data. Applied to price, it produces a cleaner baseline than most traditional moving averages.
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However it comes with 3 problems in practical day trading.
Problem #1 Standard HP Repaints History (core issue)
The standard HP filter is non-causal — the value at any point in time depends on future values CEPR, meaning past signals can change retroactively.
How I solved it:
Switching to a one-sided implementation fixes this — it only looks at past data, so history never changes once a bar closes.
Problem #2 One-Sided HP Hooks at Turns
Going one-sided introduces an endpoint artifact — near turning points the trend line briefly curves in the wrong direction before reversing, producing a false signal.
How I solved it:
Feeding the HP output into a range filter solves this. The line only moves when HP breaks outside a volatility band, so the false hook gets absorbed into a flat zone and never fires a signal.
Problem #3 Fixed Band Would Be Too Rigid
A fixed band would whipsaw in volatile markets and lag in calm ones.
How I solved it:
Instead the band is sized dynamically using a percentile of True Range, scaling automatically with current market conditions.
Intro
The Hodrick-Prescott (HP) filter is a tool originally developed by economists to remove short-term noise from data and reveal the underlying long-term trend — think of it like a moving average, but mathematically smarter.
Instead of just averaging recent prices, it solves for the smoothest possible trendline that still follows the data. Applied to price, it produces a cleaner baseline than most traditional moving averages.
---
However it comes with 3 problems in practical day trading.
Problem #1 Standard HP Repaints History (core issue)
The standard HP filter is non-causal — the value at any point in time depends on future values CEPR, meaning past signals can change retroactively.
How I solved it:
Switching to a one-sided implementation fixes this — it only looks at past data, so history never changes once a bar closes.
Problem #2 One-Sided HP Hooks at Turns
Going one-sided introduces an endpoint artifact — near turning points the trend line briefly curves in the wrong direction before reversing, producing a false signal.
How I solved it:
Feeding the HP output into a range filter solves this. The line only moves when HP breaks outside a volatility band, so the false hook gets absorbed into a flat zone and never fires a signal.
Problem #3 Fixed Band Would Be Too Rigid
A fixed band would whipsaw in volatile markets and lag in calm ones.
How I solved it:
Instead the band is sized dynamically using a percentile of True Range, scaling automatically with current market conditions.
No courses, don't sell signals — just my own edge, stats public: jalgo.ca/
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免責聲明
這些資訊和出版物並非旨在提供，也不構成TradingView提供或認可的任何形式的財務、投資、交易或其他類型的建議或推薦。請閱讀使用條款以了解更多資訊。