What it is
A Gaussian filter is a smoothing method from signal processing, described for trading by John Ehlers. It runs the price through several small smoothings in a row (the poles). Stacking them removes more noise for the same delay than one big moving average would.
The channel version, popularised by Donovan Wall, adds bands built from the same filter applied to each candle's true range. The result is a slow, calm line that changes colour rarely, so it works as a trend filter rather than an entry timer.
How it is calculated
Typical price for each candle: (high + low + close) / 3. Work out a smoothing factor from the period and the number of poles, so that more poles give a smoother line for the same period. Run the typical price through that exponential smoothing once per pole (4 times by default); the result is the middle line. Do the same to each candle's true range (the largest of high minus low and the gaps to the previous close). Upper band: middle line plus 1.414 x the filtered true range. Lower band: middle line minus the same. The line is green where it is higher than on the previous candle and red where it is lower.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| period | 144 | 5 to 500 | The main speed control. Lower periods follow price closer and change colour more often. |
| poles | 4 | 1 to 9 | How many smoothing passes. More poles give a smoother line with sharper turns; one pole is close to a plain EMA. |
| band width | 1.414 | 0.2 to 6 | How many filtered true ranges the bands sit from the middle line. |
How to read it
How to trade it
- 1
Use the colour as the direction filter on a 1 hour or 4 hour gold chart: only look for buys while it is green.
- 2
Entry trigger: a close above the upper band while the channel is green, or a pullback into the band that closes back above the middle line.
- 3
Stop below the middle line, or below the lower band for a wider swing trade. On gold 1 hour the middle line is often 10 to 30 points away; check before entering.
- 4
Target 2 times the stop, then trail under the middle line. Exit fully when the channel turns red.
A close back below the middle line cancels a breakout long, and the channel turning red ends the trend view entirely.
On WickSpeak, the Gaussian Channel writes a plain-English reading on the live candle: whether the channel is green or red, where price sits in it, how to trade that and what would prove it wrong. In Playbook you can test whether it turns up, turns down, is rising or falling, whether price closes above the upper band or below the lower band, whether price is inside the bands, and whether price is above or below it. The play engine uses the same maths as the chart, so a play tested on it matches what you see.
Best markets and timeframes
Built for swing trends: gold, US30 and NAS100 on 1 hour, 4 hour and daily charts. On 1 to 5 minute charts the default 144 period is slow, so lower it or use it on a higher timeframe as a filter.
Common mistakes
- Using the colour change as an entry. It comes late by design; it is a filter.
- Cutting the period very low to make it faster, which removes the smoothness that makes it useful.
- Buying a close above the upper band while the channel is red, against the filter.
Works well with
Questions traders ask
What are the default Gaussian Channel settings?
The common settings are a 144 period, 4 poles and a band width of 1.414 filtered true ranges, and those are the WickSpeak defaults. The middle line uses the typical price, (high + low + close) / 3.
What do poles mean in a Gaussian filter?
Each pole is one pass of smoothing. More passes give a smoother line with less delay than one heavy average of the same smoothness, but past 4 or 5 the gains are small.
Is the Gaussian Channel good for day trading?
It is designed as a slower trend filter. Day traders often read it on the 1 hour chart for direction and take entries on a 5 or 15 minute chart in that direction.
Does the Gaussian Channel repaint?
No. Each value is built only from the candles up to it, so closed candles keep their values. The live candle's value moves until it closes.