A system for determining a location of an electrode of a medical device (e.g., a catheter) in a body of a patient includes a localization block for producing an uncompensated electrode location, a motion compensation block for producing a compensation signal (i.e., for respiration, cardiac, etc.), and a mechanism for subtracting the compensation signal from the uncompensated electrode location. The result is a corrected electrode location substantially free of respiration and cardiac artifacts. The motion compensation block includes a dynamic adaptation feature which accounts for changes in a patient's respiration patterns as well as intentional movements of the medical device to different locations within the patient's body. The system further includes an automatic compensation gain control which suppresses compensation when certain conditions, such as noise or sudden patch impedance changes, are detected.