OVERVIEW

The Instantaneous Trendline is a technical indicator developed by John Ehlers, an electrical engineer who applied digital signal processing (DSP) principles to financial market analysis. Originally published in Stocks & Commodities magazine (February 2002) and detailed in his books "Rocket Science for Traders" and "Cybernetic Analysis for Stocks and Futures", this indicator isolates the trend component of price data by filtering out cyclical (oscillating) components.

CONCEPT

Unlike traditional moving averages that simply smooth price data, the Instantaneous Trendline uses mathematical techniques derived from electrical engineering to decompose price action into two distinct components:

1. Trend Component - The directional bias of the market
2. Cycle Component - The oscillating fluctuations around the trend

By applying notch filters and the Hilbert Transform methodology, Ehlers created an indicator that responds quickly to genuine trend changes while filtering out noise and short-term cycles. The result is a trendline that adapts to market conditions with significantly reduced lag compared to simple or exponential moving averages of similar periods.

The core advantage of this approach is the mathematical precision in separating what is "trend" from what is "cycle noise," rather than simply averaging price over a fixed lookback period.

HOW IT WORKS

The indicator calculates a smoothed trendline using a recursive formula based on the Alpha parameter. The formula incorporates:

• Current and recent price data (HL/2 midpoint)
• Previous trendline values
• Alpha smoothing coefficient (default 0.07)

The indicator also generates a Trigger line, which is the Instantaneous Trendline displaced by 2 bars. This trigger line is used to generate trading signals through crossover logic.

INTERPRETATION

The indicator plots three lines:

• ITrend Up: Shown when Trigger > ITrend, indicating bullish conditions
• ITrend Down: Shown when Trigger < ITrend, indicating bearish conditions
• Trigger: The 2-bar delayed version of the trendline

Signal Generation:

• Bullish Signal: When the Trigger line crosses above the Instantaneous Trendline
• Bearish Signal: When the Trigger line crosses below the Instantaneous Trendline

The color-coded display makes it easy to identify the current trend direction at a glance.

KEY PARAMETERS

Alpha (0.01 - 1.0, default 0.07)

Controls the smoothing and responsiveness of the trendline. Lower values produce smoother, slower-responding trendlines suitable for longer-term trends. Higher values increase sensitivity to price changes but may generate more false signals in choppy markets. The default value of 0.07 balances responsiveness with noise filtering.

Lines Length (default 120)

Determines how many bars of historical trendline data are displayed on the chart. This helps keep the chart clean while maintaining sufficient context.

LIMITATIONS

• Like all trend-following tools, the Instantaneous Trendline can produce whipsaws (false signals) in ranging, sideways markets
• During strong trends, the indicator may keep you in the trend longer, but you may miss the exact top or bottom
• Performance varies significantly depending on market conditions (trending vs. ranging)
• The indicator is reactive, not predictive - it identifies trends after they have begun

__________________________________________________________________________________________

MORE FREE INDICATORS

Check out my other indicators—each one built with production-level code quality and practical features traders actually need.

All free to use. But if you feel like sending coffee support, you can route it to tinyurl(dot)com/coffee-supply

Moving Averages

• Anchored Moving Average
• Deviation-Scaled Moving Average
• Kaufman Adaptive MA with Trend Vision
• Moving Average Channel
• Moving Averages Suite
• Trend Channel Moving Average

Regression-Based

• Advanced Regression Channel
• Linear Regression Channel
• Nadaraya-Watson Kernel Regression

Support/Resistance

• Fair Value Gap
• Fair Value Gap (Extended)
• Pivot Points
• Round Number

Volatility

• Initial Balance
• Trend Volatility Trail

Volume

• Volume Efficiency Analyzer
• Volume Profile Analytics
• VWAP (Volume Weighted Average Price)

Utilities/Custom

• Custom Timeframes
• Higher Timeframe Candlestick

__________________________________________________________________________________________

DISCLAIMER

Trading involves risk. This indicator is intended for technical analysis only — always apply proper risk management and trade responsibly.

FEEDBACK & IMPROVEMENTS

If you have suggestions, feature requests, or ideas for enhancement, please leave a comment in the Discussion tab. Your feedback helps improve the indicator for everyone.