Arnaud Legoux Moving Average (ALMA)

🔍 What is ALMA?

The Arnaud Legoux Moving Average (ALMA) is a smooth and responsive moving average developed by Arnaud Legoux and Dimitrios Kouzis-Loukas. Unlike traditional moving averages that lag significantly, ALMA is designed to reduce lag while maintaining smoothness — making it ideal for detecting trends with greater precision.

It achieves this through a Gaussian distribution and an offset mechanism, giving traders an edge by highlighting shifts in price momentum faster than classic moving averages.

⚙️ How Does It Work?

ALMA applies a Gaussian filter to price data. It uses three key components:

1. Window size (period) – how many candles it considers.

2. Offset – shifts the curve left or right to adjust sensitivity.

3. Sigma – controls the smoothness.

The result is a moving average that reacts more intelligently to market movements, reducing noise and avoiding the whipsaw effect.

📖 How to Read It

• When price is above the ALMA, it suggests a bullish trend.

• When price is below the ALMA, it indicates a bearish trend.

• A cross above the ALMA may signal a potential buy opportunity.

• A cross below the ALMA may signal a potential sell opportunity.

Because of its refined smoothing, ALMA provides clearer trend direction compared to traditional MAs.

🛠️ Best Settings

The default and commonly used settings are:

• Period: 9 or 20

• Offset: 0.85 (shifts the curve closer to recent data)

• Sigma: 6

Traders can tweak these values depending on the market (crypto, forex, stocks) and their timeframe (1H, 4H, Daily).

📊 How to Use It in a Strategy

Example: ALMA Trend-Following Strategy

1. Set ALMA with a 20-period, offset 0.85, sigma 6.

2. Enter long when:

   • Price crosses above the ALMA

   • Confirmed by volume or RSI
3. Enter short when:

   • Price crosses below the ALMA

   • Confirmed by bearish momentum

ALMA works well in trending markets, especially when combined with momentum indicators like RSI or MACD.

⚠️ Common Mistakes

• Using ALMA in a sideways market: Like other trend indicators, ALMA can produce false signals in choppy price action.

• Ignoring confirmation: Always use additional indicators or price action to confirm signals.

• Over-optimization: Avoid constantly changing offset or sigma just to fit past data — it may reduce real-time effectiveness.

🧠 Final Thoughts

ALMA is a powerful and modern upgrade to traditional moving averages. Its unique smoothing formula helps reduce lag and improve signal accuracy — giving traders clearer insights without the noise. It's especially valuable for short- to medium-term strategies and works well when used with complementary tools.

If you're tired of lagging MAs or noisy charts, give ALMA a try — it just might become your new favorite trend tool.