Level: 2 Background John F. Ehlers introuced Laguerre RSI Indicator in his "Cybernetic Analysis for Stocks and Futures" chapter 14 on 2004. Function “Truth and science always triumph over ignorance and superstition.” said by Dr. Ehlers. We can generate superior smoothing with very short filters, it follows that we should be able to create superior indicators...
Level: 2 Background John F. Ehlers introuced Laguerre Filter in his "Cybernetic Analysis for Stocks and Futures" chapter 14 on 2004. Function The Laguerre transform can be represented as an exponential moving average (EMA) low-pass filter (the first term) followed by a succession of allpass elements instead of unit delays (the k − 1 terms). All terms have...
Level: 2 Background John F. Ehlers introuced Three Pole Super Smoother in his "Cybernetic Analysis for Stocks and Futures" chapter 13 on 2004. Function The Super Smoother filter is formed by retaining the IIR part of a Butterworth digital filter. The order of Super Smoother filters can be increased indefinitely to increase the sharpness of the filter...
Level: 2 Background John F. Ehlers introuced Two Pole Super Smoother in his "Cybernetic Analysis for Stocks and Futures" chapter 13 on 2004. Function The transfer response of the two-pole Super Smoother is almost identical to the transfer response of the Regularized filter. The difference between the two is that the characteristics of the Super Smoother are...
Level: 2 Background John F. Ehlers introuced Three-Pole Butterworth Filter in his "Cybernetic Analysis for Stocks and Futures" chapter 13 on 2004. Function The transfer responses of Butterworth filters have polynomials in both the numerator and denominator. There is a polynomial in the numerator as well as the denominator. The significance of the polynomial...
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...