Ehlers Filters

To affinity and beyond Buzz Lightyear (paraphrased) The most common filters used by traders are moving averages either Simple Moving Averages (SMA) or Exponential Moving Averages (EMA). These are linear filters. Linear filters are optimal for smoothing stationary, slowly varying signals that are corrupted with high-frequency noise. Unfortunately, price data are not stationary much of the time. A coin flip experiment is an example of a statistical stationary process. However, if weighted coins...

What You See Is What You

Success is a journey, not a destination. That famous half-glass of water optimists see it as half-full and pessimists see it as half-empty. An engineer sees the glass as having been designed with too much capacity. That which we see is really a matter of perception. Market technicians have designed a wide variety of techniques to visualize what has happened in the past in order to infer what the future holds. Candlestick charts and Point and Figure charts are two examples of charting price...

Z Transform

Just as Laplace and Fourier Transforms are powerful tools for continuous systems, Z Transforms provide a corresponding powerful tool for discrete systems. There are significant parallels between Z Transforms and Fourier Transforms. The Z Transform can be multiplied by the transfer response of a system to obtain a Z Transform of the system output. The sampled data output for a discrete system can be found by taking the inverse Z Transform. Because this theory is so important to digital signal...

Key Point lo Remember

A um the irwirlcfet i in a Trtnd Modi p iiie cri lia arc met. A Cycle Modeexists ior 3 hnlf-douiiiwitt cycle aher the cm ins oi the Si new ivc Indicator lines or vhen the aieasv pKi c raie oi change is within 50 percent of the pb.isc of change irf tlve dominant cycle. A Trend Mode is declared if ihe 4-bar WMA i s paraccd the Instantaneous 'I endline by mour tliao 1.5 percent. The market mode can be iden i ified as a yw ntbair or uao lt i as c kle iraj menr in in automatic Leading system....

Cycleperiod Dominant Cycle Half

Perhaps the term instantaneous is a bit presumptuous to apply to the concepts we discuss in this chapter. Nonetheless, the term is somewhat appropriate in that our technology enables us to compute a continuous trendline from which we can rapidly assess market action. As derived from the Drunkard's Walk problem in Chapter 1, our model says the market consists of a Trend Mode and a Cycle Mode. It is more accurate to describe the general market as a combination of these two modes. Furthermore, in...

F The Sinewave Indicator

Sinewave Cycle Market

A painter can hang his pictures, but a writer can only hang himself. As noted in Chapter 6, the Hilbert Transform synthesizes the InPhase and Quadrature components from the analytic waveform. We can then immediately compute the phase of the signal by taking the arctangent of the ratio of these components. In principle, that should tell us where we are positioned within the cycle. Unfortunately, this is not true. The first problem is that the Hilbert Transform induces a lag of 7 bars. That lag...

Introduction To The Science Of Digital Signal Analysis

Computet are worthless They can only jtrvc you answers Make no mistake bout it. This is a book for traders about digs-til signal processing It is not a book ior engineers about trading. At first glance, the reverse may seem to be true tor many traders because the subject matter is on the cutting edge of technology and the mathematics behind this technology can be more advanced than that encountered in school. Recognizing that many traders want to simply use the technology rather than become...

Momentum Functions

Hack ward, turn backward, oh time w yuui flight. I can't begin to tell you the number ot traders that has asked me to make their signals happen just one bar sooner. The typical question is Can't you just take a momentum In the most simple case, momentum is just the 1-bar difference in pricc. Momentum is deceiving because it can give the illusion of anticipating turning points. In tact, there are cases in which some form of a momentum can increase the reaction time of an indicator. Even...