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KalmanFilterVelocity VertexFX indicator

The KalmanFilterVelocity (KFV) is a powerful VertexFX client-side indicator based on the Kalman Filter (KF) algorithm.
The KalmanFilterVelocity indicator employs the Kalman Filter to estimate the direction and strength of the trend. It is particularly useful in identifying reversal or trends. It enhances the standard Kalman Filter but detecting the velocity (the rate of change) of the base Kalman Filter. A change in the direction of the velocity implies a change a trend.
In the first step we calculate the Kalman Filter also known as Linear Quadratic Estimation for all the prices. We use the change in the closing price of each candle and its predecessor to estimate whether this change is sustainable. Hence, if prices are rising, but at a slower rate it implies that the trend is ending. Likewise, if the price is falling, but at a slower rate it implies that the bearish trend is ending.
When the KFV changes from RED to BLUE below the zero level it implies that a strong bullish trend has started and the trader can enter LONG positions. On the contrary, when the KFV changes from BLUE to RED above the zero level it implies that a strong bearish trend has started and the trader can enter SHORT positions. A change from RED to BLUE above the zero level, or from BLUE to RED below the zero level is ignored because it is identified as weakness or whipsaws. 
BUY / EXIT SHORT - In TREND mode, enter LONG (or exit SHORT) at the close of the candle when the KFV indicator turns BLUE below the zero level. In KALMAN mode, enter LONG (or exit SHORT) when the KFV indicator turns BLUE. The stop-loss should be placed at the nearest Swing Low.
SHORT / EXIT LONG - In KALMAN mode, enter SHORT (or exit LONG) at the close of the candle when the KFV indicator turns RED above the zero level. In KALMAN mode, enter SHORT (or exit LONG) when the KFV indicator turns RED. The stop-loss should be placed at the nearest Swing High.

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