When using a filter, such as a 10-day Simple Moving Average (SMA), it is important to note that it will not allow higher frequency cycles to pass through. This means that any cycles with a duration of 20 days or less will be eliminated. This is a crucial concept to understand when analyzing financial data using filters. It allows us to focus on the longer-term trends and eliminate any short-term fluctuations that may skew our analysis. So, next time you're working with filters, remember the critical role they play in identifying and interpreting market trends.
