Level: 2 Background John F. Ehlers introuced Two Pole Butterworth Filter in his "Cybernetic Analysis for Stocks and Futures" chapter 13 on 2004. Function Dr. Ehlers translated analog Butterworth filters to their digital approximations. The transfer response is characterized by a single variable—the cutoff frequency. The cutoff frequency is that frequency...
Level: 2 Background John F. Ehlers introuced Smoothed Adaptive Momentum in his "Cybernetic Analysis for Stocks and Futures" chapter 12 on 2004. Function Smoothed Adaptive Momentum is to measure the Dominant Cycle period and then use that measured period to take a onecycle momentum. It really does matter if you measure the Dominant Cycle. The trend component...
Level: 2 Background John F. Ehlers introuced Relative Vigor Index in his "Cybernetic Analysis for Stocks and Futures" chapter 6 on 2004. Function Relative Vigor Index (RVI) uses concepts dating back over three decades and also uses modern filter and digital signal processing theory to realize those concepts as a practical and useful indicator. The RVI merges...
Level: 2 Background John F. Ehlers introuced center of gravity (CG) in his "Cybernetic Analysis for Stocks and Futures" chapter 5 on 2004. Function The center of gravity (CG) of a physical object is its balance point. For example, if you balance a 12-inch ruler on your finger, the CG will be at its 6-inch point. If you change the weight distribution of the...
Level: 2 Background John F. Ehlers introuced Cyber Cycle Trading Strategy in his "Cybernetic Analysis for Stocks and Futures" chapter 4 on 2004. Function With cyber cycle alone, the Trigger lags the Cycle by one bar, so that their crossing introduces at least another bar of lag. Finally, Dr Ehler concluded that we can’t execute the trade until the bar after...
Level: 2 Background John F. Ehlers introuced Cyber Cycle Indicator in his "Cybernetic Analysis for Stocks and Futures" chapter 4 on 2004. Function Trading the Cyber Cycle Indicator is straightforward. Buy when the at this point. Sell when the Cycle line crosses under the Trigger line. You are at the bottom of the cycle at this point. Sell when the Cycle line...
Level: 2 Background John F. Ehlers introuced Instantaneous Trendline Trading Strategy in his "Cybernetic Analysis for Stocks and Futures" chapter 3 on 2004. Function With the crossover strategy that Dr. Ehlers has developed it is possible to be on the wrong side of the trade for a substantial period from time to time. For this reason, Dr. Ehlers has added a...
Level: 2 Background John F. Ehlers introuced the Instantaneous Trendline and the Trigger of the trend-following system in his "Cybernetic Analysis for Stocks and Futures" chapter 3 on 2004. Function The process for creating a trendfollowing trading system from the indicators is simple. One unique aspect of the code is that the ITrend is forced to be a finite...
Level: 2 Background John F. Ehlers introuced Fisher Transform of Normalize Price to a N-Day Channel in his "Cybernetic Analysis for Stocks and Futures" chapter 1 on 2004. Function The Fisher transform changes the PDF of any waveform so that the transformed output has an approximately Gaussian PDF. So what does this mean for trading? If the prices are...
Level: 2 Background John F. Ehlers introucedAdaptive Commodity Channel Index in his "Rocket Science for Traders" chapter 21 on 2001. Function The Commodity Channel Index (CCI) computes the average of the median price of each bar over the observation period. It also computes the Mean Deviation (MD) from this average. The CCI is formed as the current deviation...
Level: 2 Background John F. Ehlers introuced Adaptive Stochastic in his "Rocket Science for Traders" chapter 21 on 2001. Function The Stochastic measures the current closing price relative to the lowest low over the observation period. It then normalizes this to the range between the highest high and the lowest low over the observation period. If the current...
Level: 2 Background John F. Ehlers introuced Adaptive Relative Strength Index in his "Rocket Science for Traders" chapter 21 on 2001. Function The concept of taking a difference of lagging line from the original function to produce a leading function suggests extending the concept to moving averages. There is no direct theory for this, but it seems to work...
Level: 2 Background John F. Ehlers introuced Predictive Average in his "Rocket Science for Traders" chapter 20 on 2001. Function The concept of taking a difference of lagging line from the original function to produce a leading function suggests extending the concept to moving averages. There is no direct theory for this, but it seems to work pretty well. If...
Level: 2 Background John F. Ehlers introuced Optimum Predictor in his "Rocket Science for Traders" chapter 20 on 2001. Function As we have seen before, the majority of the code involves the computation of the period using the Homodyne Discriminator algorithm. Once the period has been computed, the Optimum Predictor is found in just a few lines of code....
Level: 2 Background John F. Ehlers introuced the Distance Coefficient Ehlers Filter in his "Rocket Science for Traders" chapter 18 on 2001. Function Dr. Ehlers considered the gray shading levels as distances, he had away of computing filter coefficients in terms of sharpness of the edge. White is the maximum distance in one direction from the median gray, and...
Level: 2 Background John F. Ehlers introuced Ehlers Filter in his "Rocket Science for Traders" chapter 18 on 2001. Function blackcat L2 Ehlers Filter is used to follow trend. The filters Dr. Ehlers have invented are nonlinear FIR filters. It turns out that they provide both extraordinary smoothing in sideways markets and aggressively follow major price...
Level: 2 Background John F. Ehlers introuced MESA Adaptive Moving Average-a.k.a "MAMA" in his "Rocket Science for Traders" chapter 17. Forgive the whimsy of the name Dr. Ehlers attached to this unique indicator, but with that name he is sure you will always remember it, like KAMA and VIDYA. Function blackcat L2 Ehlers MESA Adaptive Moving Average-a.k.a...
Level: 3 Background John F. Ehlers introuced ZeroLag Intraday Trading System in his "Rocket Science for Traders" chapter 16. Function blackcat L3 EhlersZeroLag Intraday Trading System is used to find proper long and short entries. Dr. Ehlers developed a completely automatic ZeroLag Intraday Trading System. The concepts of the Instantaneous Trendline and the...