Mark Jurik developed the Jurik's Moving Average (JMA) in 1998.
This program allows traders to produce an accurate technical analysis of the Forex market. The JMA is a modern version of the adaptive moving average.
Why use JMA ?
Ideally, you would like a filtered signal to be both Smooth and Lag-free. Lag causes delays in your trades, and increasing lag in your indicators typically result in lower profits. In other words, late comers get what's left on the table after the feast has already begun.
That's why Investors, Banks and Institutions Worldwide ask for the Jurik Research Moving Average (JMA). You may apply it just as you would any other popular moving average. However, JMA's improved timing and smoothness will astound you.
MA as A Proxy for Price
The first advantage to having a low-lag, low-noise Moving Average, is that you can use it as a "proxy" to replace the Price time series. To see the value of using JMA's up/down trend to determine whether the Market is rising or falling,
Lag is very undesirable because a trading system using that information will have its trading delayed. Late trades can many times be worse than no trades at all, as you might buy or sell on the wrong side of the market's cycle. Consequently, many attempts were made to minimize lag, each with their own failings.
Conquering lag while making no simplifying assumptions (e.g., that data consists of superimposed cycles, daily price changes having a Gaussian distribution, all prices are equally important, etc.) is not a trivial task. In the end, JMA had to based on the same technology the military uses to track moving objects in the air using nothing more than their noisy radar.
JMA sees the price time series as a noisy image of a moving target (the underlying smooth price) and tries to estimate the location of the real target (smooth price). The proprietary mathematics is modified to take into consideration the special properties of a financial time series.
The result is a silky smooth curve that makes no assumptions about the data having any cyclic components whatsoever. Consequently JMA can turn "on a dime" if the market (moving target) decides to turn direction or gap up/down by any amount. No price gap is too large.
After several years of research, we Jurik Research determined that the perfect noise reduction filter for financial data has the following requirements :
1. Minimum lag between signal and price, otherwise trade triggers come late.
2. Minimum overshoot, otherwise signal produces false price levels.
3. Minimum undershoot, otherwise time is lost waiting for convergence after price gaps.
4. Maximum smoothness, except at the moment when price gaps to a new level.
All strong noise filters have lag and overshoot, and JMA is no exception. However, the JMA's adjustable parameters PHASE and LENGTH offer you a way to select the optimal tradeoff between lag and overshoot. This gives you the opportunity to fine-tune various technical indicators.
