Laguerre is a VertexFX client side VTL indicator from the Digital Signal Processing family of indicators. It is a bounded oscillator between 0 and 1 that tracks the market cycles.
In the first step, we calculate a Smoothed Moving Average based upon the Close price using GAMMA smoothing constant. The current value of Smoothed Moving Average is equal to (1 - GAMMA) multiplied by the current Close price plus GAMMA multiplied by the previous value of the Smoothed Moving Average.
This step is repeated to calculate the third derivative of the Smoothed Moving Average.
In the next step we calculate the cumulative sum of the difference between the third derivative and the second derivative, and the second derivative with first derivative. If the difference is positive, it is added to the positive difference, and if the difference is negative, it is added to the negative difference.
Finally, the Laguerre indicator value is the cumulative positive difference divided by the cumulative negative difference.
The concept behind this indicator is to eliminate sideways movements and noise. When the price is trending in a particular direction (either upwards or downwards), the Laguerre value is moving in the direction of the trend. In an uptrend, the Laguerre value will rise and in a downtrend, the Laguerre value is fall.
It oscillates between 0 and +1, with either extremes indicating a saturation in the trend.
BUY - Enter BUY trade when the Laguerre indicator closes above 0.15 from below.
SELL - Enter SELL trade when the Laguerre indicator closes below 0.75 from above.