Today we are going to discuss about Zero Lag EMA 15min strategy for Nifty and Bank Nifty and how effective it is in terms of generating returns and smoothing your equity curve. Almost all smoothing filters and moving averages have lag because smoothing is done using past data.
Zero Lag is a new concept in adaptive technical analysis. Here in Zero lag EMA we show you the effects of lag removal in a indicator and then how to use the filter in a very effective way. The picture shows the simple ZeroLag EMA strategy over the 15min Nifty Charts. The thick yellow line is nothing but the Zero lag EMA and the red line is the normal EMA.Since minimization of lag is crucial to the effectiveness of indicators,several authors have devised ways to make the EMA smoothing factor vary with volatility in price.
The first relationship between the lag of an EMA and the length of a Simple Moving Average (SMA) is
alpha = 2/(Length+1)