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The Zero Lag Moving Averages
The Zero Lag Exponential Moving Average (ZLEMA) indicator was developed by John Ehlers and Ric Way. The objective is to eliminate the inherent lag associated with all trend following indicators such as averages.
The ZLEMA tries to achieve this by tracking current prices more closely than older prices similar to a normal EMA but with even more emphasis on the current prices. The end result is a moving average with minimal lag and good smoothing.
These are the advantages of the Zero Lag Moving Averages:
- An exponential moving average without the lag and therefore more responsive to recent price movements.
- The indicator can be used on all instruments and in all time-frames.
- The indicator can be used to filter signals or as a signal.
The Zero Lag Exponential Moving Average comes in two versions.
The simple mode calculates the ZLEMA one time from the close price and plots the indicator as a single line. The ZLEMA line is coloured green when the slope is going up and coloured red when the slope is going down.
The crossing mode calculates two ZLEMAs over two different horizons and plots them as two crossing lines. The coloured background indicates whether the trend is bullish or bearish.