Arnaud Legoux Moving Average (ALMA) – What It Is & How to Trade It

Arnaud Legoux Moving Average (ALMA) – What It Is & How to Trade It

What is the Arnaud Legoux Moving Average (ALMA)?

The Arnaud Legoux Moving Average (ALMA) is an advanced moving average that uses Gaussian filters to smooth price action while reducing lag. It provides better trend detection by filtering noise without sacrificing responsiveness.

ALMA is calculated using a weighted moving average with a Gaussian distribution:
ALMA = Σ(W × P) / ΣW
Where:

• W represents Gaussian weights.
• P represents the price at each period.
• ΣW is the sum of all weights.

Key Features of ALMA

• Reduces lag while maintaining responsiveness to price movements.
• Filters noise for a cleaner trend view.
• Customizable smoothing settings for different trading styles.

How to Use ALMA in Forex Trading

1. Trend Identification Strategy

• Bullish Trend: When price is above ALMA and ALMA is sloping upward.
• Bearish Trend: When price is below ALMA and ALMA is sloping downward.

Recommended Settings:

• Short-term traders: 10-period ALMA
• Swing traders: 50-period ALMA
• Long-term traders: 100-period ALMA

2. ALMA Crossover Strategy

• Buy Signal: When a short-term ALMA (e.g., 10 ALMA) crosses above a long-term ALMA (e.g., 50 ALMA).
• Sell Signal: When a short-term ALMA crosses below a long-term ALMA.

Best ALMA Combinations:

• 10 ALMA & 50 ALMA (Short-term)
• 20 ALMA & 50 ALMA (Swing trading)
• 50 ALMA & 200 ALMA (Long-term trend validation)

3. ALMA with MACD Strategy

Using ALMA with MACD can confirm trend shifts:

• Buy when: ALMA indicates an uptrend & MACD crossover confirms momentum.
• Sell when: ALMA indicates a downtrend & MACD confirms bearish pressure.

Pros and Cons of Using ALMA

✅ Pros:

• More accurate than traditional moving averages.
• Reduces lag while maintaining smooth trends.
• Adaptable for different trading strategies.

❌ Cons:

• Slightly complex to set up.
• Less commonly used than SMA or EMA.

Final Thoughts

The Arnaud Legoux Moving Average (ALMA) is a powerful tool for trend-following and reducing market noise. It’s a great choice for traders looking for precision in their moving averages.