A two-frequency data signal, also known as a biphase or F/2F signal, is accurately decoded by sampling the signal and digitizing the samples to provide a series of digital values representing the signal. An intelligent digital filter manipulates the digital values to decode the signal, by detecting the peaks in the sampled signal and decoding the signal by analyzing the location and amplitudes of the peaks. Only peaks which are outside a guard band may be detected. If the signal cannot be properly decoded with a wide guard band, the guard band may be repeatedly narrowed, until a minimum guard band is reached.Bits are identified by comparing the displacements between peaks to a bit cell width. An even number of displacements indicates a `0` bit, and an odd number of displacements indicates a `1` bit. Once a bit is decoded, the bit cell width is incremented by a predetermined amount if the bit cell width is wider than the current bit cell width, and is decremented by a predetermined amount if the decoded bit cell width is narrower than the current bit cell width. If no peaks are found within a maximum allowable bit cell width, this area is delimited as bad. An attempt is made to decode the bits in the bad area by analyzing all peaks without regard to a guard band. After decoding, the bits are converted into bytes. Parity and longitudinal redundancy code checks are used to correct bad bits.