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”
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?”
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.
The Fisher Transform converts data to or from a Gaussian distribution. It was first used in algorithmic trading by John Ehlers (1) , and became a common part of indicators since then. In a TASC February 2022 article, Ehlers described a new indicator, the Elegant Oscillator, based on the Inverse Fisher Transform. Let’s have a look at this indicator and how it’s used in a trading system.
John Ehlers strikes again. The TASC January 2022 issue features another indicator supposedly improved with Hann windowing – the RSIH, a RSI with Hann flavour. Can it beat the standard RSI?
As an application to the windowing technique described the the previous article, John Ehlers proposed a new trend indicator that he claimed is robust and yet simple. The latter is certainly true, as the MAD (Moving Average Difference) oscillator is, as the name says, just the difference of two moving averages normalized to +/-100. Continue reading “The MAD indicator”
If indicators didn’t help your trading so far, just pimp them by preprocessing their input data. John Ehlers proposed in his TASC September article the windowing technique: multiply the input data with an array of factors. Let’s see how triangle, Hamming, and Hann factor arrays can improve the SMA indicator.
Price curves consist of much noise and little signal. For separating the latter from the former, John Ehlers proposed in the Stocks&Commodities May 2021 issue an unusual approach: Treat the price curve like a radio wave. Apply AM and FM demodulating technology for separating trade signals from the underlying noise. Continue reading “The Price Wave Radio”
Financial markets are not stationary: Price curves swing all the time between trending, mean reverting, or entirely random behavior. Without a filter for detecting trend regime, any trend following strategy will bite the dust sooner or later. In Stocks & Commodities February 2021, Richard Poster proposed a trend persistence indicator for avoiding unprofitable market periods.
A major problem of indicator-based strategies is that most indicators produce more or less noisy output, resulting in false signals. The faster the indicator reacts on market situations, the noisier is it usually. In the S&C December issue, John Ehlers proposed a de-noising technology based on correlation. Compared with a lowpass filter, this method does not delay the signal. As an example, we will apply the noise elimination to Ehlers’ MyRSI indicator, a RSI variant that he presented in an earlier article. Continue reading “Petra on Programming: Get Rid of Noise”