By the Fourier theorem, any price curve is a mix of many long-term and short-term cycles. Once in a while a dominant market cycle emerges and can be exploited for trading. In his TASC 5/2026 article, John Ehlers described an algorithm for detecting such dominant cycles, using them to tune a bandpass filter, and creating a profitable trading system. Here’s how to do it.
Tag: Ehlers
The One Euro Filter
Whenever John Ehlers writes about a new indicator, I crack it open and wire it straight into C for the Zorro platform. Or rather, I let ChatGPT do most of the work. The One Euro Filter is a minimalistic, yet surprisingly effective low-latency smoother that reacts instantly to volatility with less lag of the usual adaptive averages. This is achieved by dynamically adapting its time period. Continue reading “The One Euro Filter”
The Cybernetic Oscillator
Oscillator-type indicators swing around the zero line. They are often used for opening positions when oscillator exceeds a positive or negative threshold. In his article series about no-lag indicators, John Ehlers presents in the TASC June issue the Cybernetic Oscillator. It is built by applying a highpass and afterwards a lowpass filter to the price curve, then normalizing the result.
Ehlers’ Ultimate Oscillator
In his TASC article series about no-lag indicators, John Ehlers presented last month the Ultimate Oscillator. What’s so ultimate about it? Unlike other oscillators, it is supposed to indicate the current market direction with almost no lag. Continue reading “Ehlers’ Ultimate Oscillator”
The Ultimate Strength Index
The RSI (Relative Strength Index) is a popular indicator used in many trading systems for filters or triggers. In TASC 12/2024 John Ehlers proposed a replacement for this indicator. His USI (Ultimate Strength Index) has the advantage of symmetry – the range is -1 to 1 – and, especially important, less lag. So it can trigger trades earlier. Like the RSI, it enhances cycles and trends in the data, which makes it well suited for various sorts of trading systems. Let’s look how to realize it in code. Continue reading “The Ultimate Strength Index”
Ehlers’ Precision Trend Analysis
In TASC 8/24, John Ehlers presented a new algorithm for separating the trend line from a price curve, using spectral analysis functions. Trend lines are only useful for trading when they have little lag, so that trend changes can immediately trigger trade signals. The usual suspects like SMA, WMA, EMA are too laggy for this. Let’s see how good this new algorithm works. The functions below are a 1:1 conversion from Ehlers’ TradeStation code to C. Continue reading “Ehlers’ Precision Trend Analysis”
Ehlers’ Ultimate Smoother
In TASC 3/24, John Ehlers presented several functions for smoothing a price curve without lag, smoothing it even more, and applying a highpass and bandpass filter. No-lag smoothing, highpass, and bandpass filters are already available in the indicator library of the Zorro platform, but not Ehlers’ latest invention, the Ultimate Smoother. It achieves its tremendous smoothing power by subtracting the high frequency components from the price curve, using a highpass filter. Continue reading “Ehlers’ Ultimate Smoother”
Undersampling
All the popular ‘smoothing’ indicators, like SMA or lowpass filters, exchange more lag for more smoothing. In TASC 4/2023, John Ehlers suggested the undersampling of price curves for achieving a better compromise between smoothness and lag. We will check that by applying a Hann filter to the original price curve and to a 5-fold undersampled curve. Continue reading “Undersampling”
Open or Close? Why Not Both?
In his TASC February 2023 article, John Ehlers proposed to use the average of open and close, rather than the close price, for technical indicators. The advantage is a certain amount of noise reduction. On intraday bars the open-close average is similar to an SMA(2). It makes the data a bit smoother, but at cost of additional lag by half a bar. Continue reading “Open or Close? Why Not Both?”
Ehlers Loops
Price charts normally display price over time. Or in some special cases price over ranges or momentum. In his TASC articles in June and July 2022, John Ehlers proposed a different way of charting. The relation of two parameters, like price over momentum, or price A over price B, is displayed as a 2D curve in a scatter plot. The resulting closed or open loop is supposed to predict the future price development. Of course only if interpreted in the right way.