Filter Builder in SharpTrader: A Step Toward the Next-Generation AI Assistant Saturday September 27th, 2025 – Posted in: Arbitrage Software

Introduction

Today, trading is entering a new wave of development: artificial intelligence is no longer just helping with routine tasks—it is becoming a full participant in the process. In our SharpTrader platform, we are preparing to launch an AI assistant that will work based on trader prompts.

Its goal is to simplify the process of creating and testing trading ideas significantly. At the first stage, the assistant will learn to develop filters—modules that determine when a strategy is allowed to operate and when it is better to stay out of the market. Later, the capabilities will expand: we plan for the assistant to generate complete trading strategies, from idea to implementation.

Why focus on filters first? Filters are the foundation of any system. Even the strongest entry point can result in losses if used without considering market context. Filters help align a strategy with the market phase, trend strength, volatility level, and other factors. They turn a raw flow of signals into logical and sustainable trading.

In this article, we will: examine the classification of filters by groups, describe which indicators can be used, show examples of universal rules, and explain how to assemble a modular “filter builder.” Finally, we’ll invite you to share your feedback on prioritizing this AI assistant.

1. Indicator Groups & Filter Logic

Group A — Price ↔ Indicator Cross

Meaning: When price crosses a reference line, we determine in which direction to allow trading. If price is above—buys are allowed; if below—sells.

Tools: Moving Averages; midline of a channel/range; clouds or key trend lines; Parabolic SAR (flip points).

Rules: Price crosses line upward → AllowBuyOnly for N bars. Price above channel midline → AllowBuyOnly; below → AllowSellOnly. SAR flips from below to above → AllowSellOnly.

Group B — Indicator ↔ Signal Cross

Meaning: The main indicator line crosses its signal/aux line.

Tools: MACD-like indicators; Stochastic (%K vs %D); market strength indices with two lines; Alligator crossings.

Rules: Main above signal → AllowBuyOnly. Main below signal → AllowSellOnly. %K crosses %D up in oversold → reinforced AllowBuyOnly.

Group C — Oscillator Levels/Zones

Meaning: Oscillators identify overbought/oversold zones.

Tools: RSI, Stochastic, CCI, DeMarker, Williams %R, Momentum (100), histograms with zero line.

Rules: RSI < 30 → AllowBuyOnly. RSI > 70 → AllowSellOnly. CCI > +100 → AllowBuyOnly. Momentum > 100 → AllowBuyOnly.

Group D — Trend & Strength

Meaning: Filter trades by trend direction/strength.

Tools: ADX with +DI/−DI; MA slope; price vs cloud/zone.

Rules: ADX > 20 and +DI > −DI → buys only. ADX > 20 and −DI > +DI → sells only. Long-term slope positive and price above it → buys only.

Group E — Volatility Regime

Meaning: The strategy works only with sufficient volatility.

Tools: ATR, Standard Deviation, channel width.

Rules: ATR(14) above threshold → EnableTrading; below → DisableTrading. Rising StdDev for several bars → breakout mode.

Group F — Band/Channel Position

Meaning: Filter by price location within a range.

Tools: Channel bands; high/low ranges; Donchian channel.

Rules: Upper third → AllowSellOnly. Lower third → AllowBuyOnly. Upper boundary breakout (with retest) → AllowBuyOnly.

Group G — Structure/Breakout

Meaning: Filter by level breakouts and market structure.

Tools: Fractals; high/low ranges; zero-line histogram breaks.

Rules: Break of last local High → AllowBuyOnly. Break of local Low → AllowSellOnly.

Group H — Volume/Participation

Meaning: Trades are allowed if volume confirms the move.

Tools: OBV; Accumulation/Distribution; MFI.

Rules: OBV makes a new high → AllowBuyOnly. New low → AllowSellOnly. MFI > 80 → sells only; MFI < 20 → buys only.

Group I — Bill Williams Composite

Meaning: Use the Bill Williams toolkit.

Tools: Alligator; Fractals; AO/AC.

Rules: Alligator “opens” → trend filter active. AO > 0 and rising → AllowBuyOnly.

2. Indicator → Group Mapping

Row color reflects the primary group of the indicator.

3. Universal Filters

Each filter returns one of the modes: AllowBuyOnly, AllowSellOnly, Disable (or Both, if unrestricted).

Main parameters: Lookback/ConfirmBars (hold for N bars); Thresholds (e.g., RSI 30/70); DirectionSource (main trend filter); VolatilityGate (enable/disable by volatility); TimeInForce (signal lifetime).

• A: PriceCross(line, dir=Up, confirm=2) → AllowBuyOnly.
• B: CrossOver(main, signal, dir=Up) → AllowBuyOnly.
• C: Zone(RSI, buy<30, sell>70) → zone filter.
• D: Trend(ADX>20 & +DI>−DI) → buys only.
• E: Volatility(ATR>threshold) → else Disable.
• F: BandPosition(upper tercile → SellOnly, lower → BuyOnly).
• G: Breakout(level=High) → AllowBuyOnly.
• H: VolumeSlope(OBV rising) → confirm buys.
• I: WilliamsPack(Alligator+AO) → AllowBuyOnly.

4. How to Assemble a Filter Builder

The architecture combines:

• Direction source (Group D)
• Trigger permission (Groups A/B/C/F/G/I)
• Volatility gate (Group E)
• Volume confirmation (Group H)
• Signal lifecycle (ConfirmBars/TimeInForce)

Conclusion & Feedback

We reviewed how to systematize indicators and convert them into universal filters for a builder. This is the first step toward the SharpTrader AI assistant. At launch, it will help create filters and, over time, complete trading strategies.

We’d love your input: How interesting is the AI assistant for SharpTrader? Which filters or functions should come first? Should we invest developer resources in this project?

Your comments and suggestions will help us set priorities and gauge demand within the trading community.