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Note: This download requires NinjaTrader 8 release 8.1.3 or newer.

What is the Recursive Median Filter?

The Recursive Median Filter (RMF) for NinjaTrader is a specialized indicator used in technical analysis to smooth out price data while preserving significant trends and patterns. Unlike traditional moving averages that might blur important price spikes, the RMF is designed to ignore sudden value spikes without averaging them, allowing traders to focus on meaningful market movements.

How Does It Work?

At its core, the Recursive Median Filter operates by calculating the median of recent price data and then applying an exponential smoothing factor. This process involves two key steps:

1. Median Calculation: The filter maintains a queue of recent closing prices (or any other specified input). By calculating the median of this dataset, it effectively identifies the central tendency of price movements, reducing the impact of outliers or extreme values.
2. Exponential Smoothing: The median price is then smoothed using an exponential moving average (EMA) formula. The smoothing factor is determined by a trigonometric function based on a user-defined critical period. This period represents the threshold for filtering out longer-wavelength data, allowing the RMF to pass data with wavelengths shorter than this critical period.

The combination of median filtering and exponential smoothing results in an indicator that is both responsive to recent price changes and robust against erratic market fluctuations.

Key Features of the Recursive Median Filter

• Spike Resistance: By focusing on the median rather than the mean, the RMF reduces the influence of sudden price spikes, which can often mislead traders using traditional moving averages.
• Customizable Parameters: Traders can adjust the critical period and median length to tailor the filter's sensitivity to their specific trading strategy or the characteristics of the asset being analyzed.
  • Critical Period: Determines the wavelength threshold. Data with wavelengths longer than this period are filtered out.
  • Median Length: Specifies the number of data points used in the median calculation.
• Recursive Nature: The filter references its previous values in calculations, ensuring continuity and smooth transitions in the outputted signal.

Review the screenshots for setup options.

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