What Is A Cycle

The dictionary definition of a cycle is that it is an interval or space of time in which is completed one round of events or phenomena that recur regularly and in the same sequence. In the market, we consider a classic cycle exists when the price starts low, rises smoothly to a high over a length of time, and then smoothly falls back to the original price over the same length of time. The time required to complete the cycle is called the period of the cycle or the cycle length. Cycles certainly...

Trading With Mesa The Trend Is Your Friend

Allowing time to progress to 890413 as shown in Figure 12-4, we see the current measured cycle is 20 days, as shown in the spectrum display. The 3-day average of the cycle length displayed below the bar chart is 22 days. Note that the price has not touched the trendline in the last half cycle (10 days), so we declare an uptrend to be in force, as indicated by note (3). If we had been really lucky (by being inattentive to MESA signals, for example) we would still have had our long position from...

Maximum Entropy Spectral Analysis Mesa

MESA is an outgrowth of the predictive deconvolution filtering techniques developed by geophysicists for oil exploration.2,3 Its specific goal is to obtain high resolution measurements from minimum length data precisely the requirement for the identification of short-term cycles in the market. If we have a frequency source followed by a filter, the output of the filter is just those frequency components of the filter that were allowed to pass through the filter. This is mathematically expressed...

Moving Average Convergencedivergence Macd

MACD was invented by Gerry Appel for the stock market because he noted significant market cycles of 12 to 13 weeks and 24 to 28 weeks. Although developed for weekly markets, MACD has been used with the constants unchanged for daily commodity markets This must be a truly robust indicator since there is no guarantee that there are 13- or 26-day cycles in commodities. A divergence occurs when the line drawn between successive significant highs of the indicator have a slope opposite that of the...

Traders Advantage Series Preface

The Trader's Advantage series is a new concept in publishing for traders and analysts of futures, options, equity and generally all world economic markets. Books in the series present single ideas with only that background information needed to understand the content. No long introductions, no definitions of the futures contract, clearing house and order entry. Focused. The Futures and Options Industry is no longer in its infancy. From its role as an agricultural vehicle it has become the...

Exponential Moving Averages

Exponential Moving Average Response

The exponential moving average EMA is a way of recursively calculating the average, emphasizing most recent data more than older data. The EMA, by the way, is a mathematical realization of real filters. Simple averages can only be calculated, they cannot be generated in physically realizable filters. The equation for the EMA is NEW EMA - 1 - K OLD EMA K NEW SAMPLE In words, this equation says that today's EMA is formed by taking a fraction of today's data and adding it to the compliment of the...

Marker Cycles

New York Chichester Brisbane Toronto Singapore In recognition of the importance of preserving what ha been written, it n a policy of John Wiley amp Sons, Inc., to have books of enduring value published in the United Slates printed on acid-free paper, and we exert our best efforts to that end. Copyright 1992 by John F. Ehlers Published by John Wiley amp Sons. Inc. All rights reserved. Published simultaneously in Canada. Reproduction or translation of any part of this...

Leading Indicators

An optimum predictive filter can be derived for a message source having a Poisson probability distribution for its waveform 1 A Poisson distribution describes the probability of zero crossings within a given interval for a waveform having a zero mean and swinging between positive and negative values. Skipping all the heavy math and applying the optimum predictive filter to trading, this filter turns out to be basically the price less its EMA if the price function is modified to have a zero...

Mesa

John Ehlers is the consummate technical analyst. Eminently qualified, highly experienced and deeply committed, he is willing to share the method behind his efforts. MESA Maximum Entropy Spect ral Analysis is primarily the ident ification of short-term cycles for trading. But it is taken much further. Cycles alone are an interesting application of price analysis because they forecast, rather than explain, price movement. The goal of explaining price action is to be able to say what prices are...