TRADERS’ TIPS
For this month’s Traders’ Tips, the focus is John Ehlers’ article in this issue, “Decyclers.” Here, we present the September 2015 Traders’ Tips code with possible implementations in various software.
The Traders’ Tips section is provided to help the reader implement a selected technique from an article in this issue or another recent issue. The entries here are contributed by software developers or programmers for software that is capable of customization.
In “Decyclers” in this issue, author John Ehlers describes a method for constructing an oscillator that can help traders detect trend reversals with almost no lag. Ehlers calls this new oscillator a decycler. The author begins the process by isolating the high-frequency components present in the input data. He then subtracts these from the input data leaving only the lower-frequency components representing the trend.
For convenience, we are providing some EasyLanguage code for the simple decycler and decycler oscillator indicators based on Ehlers’ concepts. In addition, we are providing code for a TradeStation function to calculate the decycler oscillator, and a strategy that demonstrates the function’s usage.
Indicator: Simple Decycler // TASC Sep 2015 // Decyclers - John F. Ehlers // Simple Decyclers inputs: HPPeriod( 125 ) ; variables: alpha1( 0 ), HP( 0 ), Decycle( 0 ) ; // High Pass Filter alpha1 = ( Cosine ( 0.707 * 360 / HPPeriod ) + Sine( 0.707 * 360 / HPPeriod ) - 1 ) / Cosine( .707 * 360 / HPPeriod ) ; HP = ( 1 - alpha1 / 2 ) * ( 1 - alpha1 / 2 ) * ( Close - 2 * Close[1] + Close[2] ) + 2 * ( 1 - alpha1 ) * HP[1] - ( 1 - Alpha1 ) * ( 1 - alpha1 ) * HP[2] ; Decycle = Close - HP ; Plot1( Decycle, "DeCycle" ) ; Plot2( 1.005 * Decycle, "UpperBand" ) ; Plot3( 0.995 * Decycle, "LowerBand" ) ; Indicator: Decycler Oscillator // TASC Sep 2015 // Decyclers - John F. Ehlers // Decycler Oscillator inputs: HPPeriod( 125 ), K( 1 ) ; variables: alpha1( 0 ), alpha2( 0 ), HP( 0 ), Decycle( 0 ), DecycleOsc( 0 ) ; alpha1 = ( Cosine ( 0.707 * 360 / HPPeriod ) + Sine( 0.707 * 360 / HPPeriod ) - 1 ) / Cosine( .707 * 360 / HPPeriod ) ; HP = ( 1 - alpha1 / 2 ) * ( 1 - alpha1 / 2 ) * ( Close - 2 * Close[1] + Close[2] ) + 2 * ( 1 - alpha1 ) * HP[1] - ( 1 - Alpha1 ) * ( 1 - alpha1 ) * HP[2] ; Decycle = Close - HP ; alpha2 = ( Cosine( 0.707 * 360 / ( 0.5 * HPPeriod ) ) + Sine( 0.707 * 360 / ( 0.5 * HPPeriod ) ) - 1) / Cosine( 0.707 * 360 / ( 0.5 * HPPeriod ) ) ; DecycleOsc = ( 1 - alpha2 / 2 ) * ( 1 - alpha2 / 2 ) * ( Decycle - 2 * Decycle[1] + Decycle[2] ) + 2 * ( 1 - alpha2 ) * DecycleOsc[1] - ( 1 - alpha2 ) * ( 1 - alpha2 ) * DecycleOsc[2] ; Plot1( 100 * K * DecycleOsc / Close, "DecycleOsc" ) ; Plot2( 0, "ZeroLine" ) ; Function: DecyclerOscillator // TASC Sep 2015 // Decyclers - John F. Ehlers // Decycler Oscillator Function inputs: Price( NumericSeries ), HPPeriod( NumericSimple ), K( NumericSimple ) ; variables: alpha1( 0 ), alpha2( 0 ), HP( 0 ), Decycle( 0 ), DecycleOsc( 0 ) ; // High Pass Filter alpha1 = ( Cosine ( 0.707 * 360 / HPPeriod ) + Sine( 0.707 * 360 / HPPeriod ) - 1 ) / Cosine( .707 * 360 / HPPeriod ) ; HP = ( 1 - alpha1 / 2 ) * ( 1 - alpha1 / 2 ) * ( Price - 2 * Price[1] + Price[2] ) + 2 * ( 1 - alpha1 ) * HP[1] - ( 1 - Alpha1 ) * ( 1 - alpha1 ) * HP[2] ; Decycle = Price - HP ; alpha2 = ( Cosine( 0.707 * 360 / ( 0.5 * HPPeriod ) ) + Sine( 0.707 * 360 / ( 0.5 * HPPeriod ) ) - 1) / Cosine( 0.707 * 360 / ( 0.5 * HPPeriod ) ) ; DecycleOsc = ( 1 - alpha2 / 2 ) * ( 1 - alpha2 / 2 ) * ( Decycle - 2 * Decycle[1] + Decycle[2] ) + 2 * ( 1 - alpha2 ) * DecycleOsc[1] - ( 1 - alpha2 ) * ( 1 - alpha2 ) * DecycleOsc[2] ; DecyclerOscillator = 100 * K * DecycleOsc / Price ; Strategy: Decycler Oscillator // TASC Sep 2015 // Decyclers - John F. Ehlers // Decycler Oscillator Strategy inputs: Price( Close ), Fast_HPPeriod( 100 ), Fast_K( 1.2 ), Slow_HPPeriod( 125 ), Slow_K( 1 ) ; variables: Fast_Val( 0 ), Slow_Val( 0 ) ; Fast_Val = DecyclerOscillator( Price, Fast_HPPeriod, Fast_K ) ; Slow_Val = DecyclerOscillator( Price, Slow_HPPeriod, Slow_K ) ; if Fast_Val crosses over Slow_Val then Buy next bar at Market else if Slow_Val crosses over Fast_Val then SellShort next bar at Market ;
To download the EasyLanguage code, please visit our TradeStation and EasyLanguage support forum. The code for this article can be found here: https://www.tradestation.com/TASC-2015. The ELD filename is “TASC_SEP2015.ELD.” For more information about EasyLanguage in general, please see https://www.tradestation.com/EL-FAQ.
A sample chart is shown in Figure 1.
FIGURE 1: TRADESTATION. Here is an example of the simple decycler, decycler oscillator indicators, and decycler oscillator strategy applied to a daily chart of the SPY.
This article is for informational purposes. No type of trading or investment recommendation, advice, or strategy is being made, given, or in any manner provided by TradeStation Securities or its affiliates.
In “Decyclers” in this issue, author John Ehlers presents a simple decycler and his decycle oscillator. MetaStock formulas based on his article are shown here:
Simple Decycler:
ti:= 125;{time periods}
alpha1:= (Cos(.707*360/ti) + Sin(.707*360/ti) -1)/Cos(.707*360/ti);
HP:= (1-alpha1/2)*(1-alpha1/2)*(C - Ref(2*C,-1) + Ref(C,-2)) +
2*(1-alpha1)*PREV - (1-alpha1)*(1-alpha1)*Ref(PREV,-1);
decycle:= C - hp;
Decycle;
1.005*decycle;
0.995*decycle
Decycle Oscillator:
ti:= 125;{time periods}
K:= 1; {scaler}
alpha1:= (Cos(.707*360/ti) + Sin(.707*360/ti) -1)/Cos(.707*360/ti);
HP:= (1-alpha1/2)*(1-alpha1/2)*(C - Ref(2*C,-1) + Ref(C,-2)) +
2*(1-alpha1)*PREV - (1-alpha1)*(1-alpha1)*Ref(PREV,-1);
decycle:= C - hp;
alpha2:= (Cos(.707*360/(.5*ti)) + Sin(.707*360/(.5*ti)) -1)/Cos(.707*360/(.5*ti));
DecycleOsc:= (1-alpha2/2)*(1-alpha2/2)*(decycle - Ref(2*decycle,-1) + Ref(decycle,-2)) + 2*(1-alpha2)*PREV - (1-alpha2)*(1-alpha2)*Ref(PREV,-1);
100*k*DecycleOsc/C
For this month’s Traders’ Tip, we’re providing two studies: SimpleDecycler.efs and DecyclerOscillator.efs, based on the article in this issue by John Ehlers, titled “Decyclers.” In the article, Ehlers presents a method of identifying trends with virtually no lag, unlike with moving averages. The SimpleDecycler study is overlaid on the chart (see Figure 2), whereas the DecyclerOscillator is displayed as a subchart (Figure 3).
FIGURE 2: eSIGNAL. Here is an example of the SimpleDecycler study plotted on a daily chart of the SPY.
Figure 3: eSIGNAL. Here is an example of the DecyclerOscillator study plotted on a daily chart of the SPY.
The studies contain formula parameters that may be configured through the edit chart window (right-click on the chart and select “edit chart”).
To discuss this study or download a complete copy of the formula code, please visit the EFS Library Discussion Board forum under the forums link from the support menu at www.esignal.com or visit our EFS KnowledgeBase at https://www.esignal.com/support/kb/efs/. The eSignal formula script (EFS) is also available here:
/*********************************
Provided By:
Interactive Data Corporation (Copyright © 2015)
All rights reserved. This sample eSignal Formula Script (EFS)
is for educational purposes only. Interactive Data Corporation
reserves the right to modify and overwrite this EFS file with
each new release.
Description:
Decyclers by John Ehlers
Formula Parameters: Default:
HP Period 125
Version: 1.00 07/09/2015
Notes:
The related article is copyrighted material. If you are not a subscriber
of Stocks & Commodities, please visit www.traders.com.
**********************************/
var fpArray = new Array();
function preMain(){
setStudyTitle("Simple Decycler");
setPriceStudy(true);
setCursorLabelName("UpperBand", 0);
setCursorLabelName("Decycler", 1);
setCursorLabelName("LowerBand", 2);
setDefaultBarFgColor(Color.red, 1);
var x = 0;
fpArray[x] = new FunctionParameter("fpHPPeriod", FunctionParameter.NUMBER);
with(fpArray[x++]){
setName("HP Period");
setLowerLimit(1);
setDefault(125);
}
}
var bInit = false;
var bVersion = null;
var xClose = null;
var xHP = null;
function main(fpHPPeriod){
if (bVersion == null) bVersion = verify();
if (bVersion == false) return;
if (!bInit){
xClose = close();
xHP = efsInternal('Calc_HP', xClose, fpHPPeriod);
bInit = true;
};
var nClose = xClose.getValue(0);
var nHP = xHP.getValue(0);
if (nHP == null || nClose == null)
return;
var nDecycle = nClose - nHP;
return [nDecycle * 1.005, nDecycle, nDecycle * .995];
}
var nAlpha = null;
function Calc_HP(xSource, nPeriod){
nAlpha = (Math.cos(.707*360 / nPeriod * Math.PI / 180) +
Math.sin(.707*360 / nPeriod * Math.PI / 180) - 1) /
Math.cos(.707*360 / nPeriod * Math.PI / 180);
var nSource = xSource.getValue(0);
var nSource1 = xSource.getValue(-1);
var nSource2 = xSource.getValue(-2);
if (nSource == null || nSource1 == null|| nSource2 == null)
return;
var nHP_1 = ref(-1);
var nHP_2 = ref(-2);
var nHP = Math.pow((1 - nAlpha / 2), 2) * (nSource - 2 * nSource1 + nSource2) +
2 * (1 - nAlpha) * nHP_1 - Math.pow((1 - nAlpha), 2) * nHP_2;
return nHP;
}
function verify(){
var b = false;
if (getBuildNumber() < 779){
drawTextAbsolute(5, 35, "This study requires version 8.0 or later.",
Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
null, 13, "error");
drawTextAbsolute(5, 20, "Click HERE to upgrade.@URL=https://www.esignal.com/download/default.asp",
Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
null, 13, "upgrade");
return b;
}
else
b = true;
return b;
}
/*********************************
Provided By:
Interactive Data Corporation (Copyright © 2015)
All rights reserved. This sample eSignal Formula Script (EFS)
is for educational purposes only. Interactive Data Corporation
reserves the right to modify and overwrite this EFS file with
each new release.
Description:
Decyclers by John Ehlers
Formula Parameters: Default:
HP Period 125
K 1
Version: 1.00 07/09/2015
Notes:
The related article is copyrighted material. If you are not a subscriber
of Stocks & Commodities, please visit www.traders.com.
**********************************/
var fpArray = new Array();
function preMain(){
setStudyTitle("Decycler Oscillator");
setCursorLabelName("ZeroLine", 0);
setCursorLabelName("DecyclerOsc", 1);
setDefaultBarFgColor(Color.grey, 0);
setDefaultBarThickness(1, 0);
setDefaultBarThickness(2, 1);
setShowCursorLabel(false, 0);
setShowCursorLabel(true, 1);
var x = 0;
fpArray[x] = new FunctionParameter("fpHPPeriod", FunctionParameter.NUMBER);
with(fpArray[x++]){
setName("HP Period");
setLowerLimit(1);
setDefault(125);
}
fpArray[x] = new FunctionParameter("fpK", FunctionParameter.NUMBER);
with(fpArray[x++]){
setName("K");
setDefault(1);
}
}
var bInit = false;
var bVersion = null;
var xClose = null;
var xHP = null;
var xDecycle = null;
var xDecycleOsc = null;
function main(fpHPPeriod, fpK){
if (bVersion == null) bVersion = verify();
if (bVersion == false) return;
if (!bInit){
xClose = close();
xHP = efsInternal('Calc_HP', xClose, fpHPPeriod);
xDecycle = efsInternal('Calc_Decycle', xClose, xHP);
xDecycleOsc = efsInternal('Calc_HP', xDecycle, .5 * fpHPPeriod);
bInit = true;
};
var nClose = xClose.getValue(0);
var nDecycleOsc = xDecycleOsc.getValue(0);
if (nDecycleOsc == null || nClose == null)
return;
var nReturnValue = 100 * fpK * nDecycleOsc / nClose;
return [0, nReturnValue];
}
var nAlpha = null;
function Calc_HP(xSource, nPeriod){
nAlpha = (Math.cos(.707*360 / nPeriod * Math.PI / 180) +
Math.sin(.707*360 / nPeriod * Math.PI / 180) - 1) /
Math.cos(.707*360 / nPeriod * Math.PI / 180);
var nSource = xSource.getValue(0);
var nSource1 = xSource.getValue(-1);
var nSource2 = xSource.getValue(-2);
if (nSource == null || nSource1 == null|| nSource2 == null)
return;
var nHP_1 = ref(-1);
var nHP_2 = ref(-2);
var nHP = Math.pow((1 - nAlpha / 2), 2) * (nSource - 2 * nSource1 + nSource2) +
2 * (1 - nAlpha) * nHP_1 - Math.pow((1 - nAlpha), 2) * nHP_2;
return nHP;
}
function Calc_Decycle(xSource, xHP){
var nSource = xSource.getValue(0);
var nHP = xHP.getValue(0);
if (nHP == null || nSource == null)
return;
var nDecycle = nSource - nHP;
return nDecycle;
}
function verify(){
var b = false;
if (getBuildNumber() < 779){
drawTextAbsolute(5, 35, "This study requires version 8.0 or later.",
Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
null, 13, "error");
drawTextAbsolute(5, 20, "Click HERE to upgrade.@URL=https://www.esignal.com/download/default.asp",
Color.white, Color.blue, Text.RELATIVETOBOTTOM|Text.RELATIVETOLEFT|Text.BOLD|Text.LEFT,
null, 13, "upgrade");
return b;
}
else
b = true;
return b;
}
In “Decyclers” in this issue, author John Ehlers presents the idea of detrending to build his decycler. In general, Ehlers discusses how cycle patterns go hand in hand with trends, so he built his decycler to go hand in hand with detrending studies.
We have built two new studies—the simpler decycler and decycler oscillator—for use in thinkorswim based on these concepts. The studies use our proprietary scripting language, thinkscript. We have made the loading process extremely easy; simply click on the following links: https://tos.mx/OZUx2C and https://tos.mx/HPPszc, and choose save script to thinkorswim, then choose to rename your studies to “SimplerDecycler” and “DecyclerOscillator,” in that order. You can adjust the parameters of these within the edit studies window to fine-tune your variables.
In the example chart in Figure 4, you see the SimplerDecycler plotted on top of the price graph and the DecyclerOscillator plotted in the subgraph.
FIGURE 4: THINKORSWIM. The SimplerDecycler is plotted on top of the price graph and the DecyclerOscillator is plotted in the subgraph.
In his article in this issue, titled “Decyclers,” author John Ehlers shares two new decycler indicators whose main feature is the ability to identify trends with virtually zero lag.
We’ve developed a long-only trading system based on his concepts to demonstrate the timely response of the decycler oscillator to market action. It applies the idea of using a decycler oscillator pair with different parameters, as discussed in Ehlers’ article:
On the price pane, the decycler is plotted along with the hysteresis lines (+/- 0.5 percent). The green background indicates an uptrend in the market (the prices are above the upper hysteresis line) and the red background indicates a downtrend (the prices are below the lower hysteresis line). The bottom pane illustrates trend detection according to the pair of decycler oscillators. The yellow line has a period of 100 a K value of 1.2 and the red line has a period of 125 and a K value of 1.
As can be seen in Figure 5, robust application of the decycler bands in a trading system requires putting in some logic against whipsaw conditions such as from March 2015 to June 2015. The DecyclerOscillator seems to produce less whipsaws.
FIGURE 5: WEALTH-LAB. The price pane shows the decycler indicator with the hysteresis lines. The bottom pane plots a pair of decycler oscillators.
To execute the included trading system, Wealth-Lab users need to install (or update to) the latest version of the TASCÂIndicators library from the extensions section of our website if they haven’t already done so, and restart Wealth-Lab.
Wealth-Lab 6 code (C#):
using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;
using TASCIndicators;
namespace WealthLab.Strategies
{
public class MyStrategy : WealthScript
{
protected override void Execute()
{
// Decycler and oscillator
SimpleDecycler sd = SimpleDecycler.Series(Close,125);
DecyclerOscillator do1 = DecyclerOscillator.Series(Close,125,1.0);
// Hysteresis band 0.5%
DecyclerOscillator do2 = DecyclerOscillator.Series(Close,(int)(125 * 0.8),1.0 * 1.2);
HideVolume();
ChartPane paneDecyclerOsc = CreatePane(30,false,true);
PlotSeries(paneDecyclerOsc,do1,Color.Red,LineStyle.Solid,2);
PlotSeries(paneDecyclerOsc,do2,Color.Goldenrod,LineStyle.Solid,2);
PlotSeries(PricePane,sd,Color.Red,LineStyle.Solid,2);
PlotSeriesFillBand(PricePane, sd * 1.005, sd * 0.995, Color.Goldenrod, Color.Transparent, LineStyle.Solid, 2);
for(int bar = GetTradingLoopStartBar(125); bar < Bars.Count; bar++)
{
if ( Close[bar] > (sd[bar] * 1.005) )
SetPaneBackgroundColor( PricePane, bar, Color.FromArgb(30,Color.Green) );
else
if ( Close[bar] < (sd[bar] * 0.995) )
SetPaneBackgroundColor( PricePane, bar, Color.FromArgb(30,Color.Red) );
bool reverse2Uptrend = CrossOver( bar, do2, do1 );
bool reverse2Downtrend = CrossUnder( bar, do2, do1 );
if (IsLastPositionActive)
{
if ( !reverse2Downtrend || reverse2Uptrend )
SetPaneBackgroundColor( paneDecyclerOsc, bar, Color.FromArgb(30,Color.Green) );
if( reverse2Downtrend )
SellAtMarket(bar+1, LastPosition);
}
else
{
if ( reverse2Downtrend || !reverse2Uptrend )
SetPaneBackgroundColor( paneDecyclerOsc, bar, Color.FromArgb(30,Color.Red) );
if( reverse2Uptrend )
BuyAtMarket(bar+1);
}
}
}
}
}
In “Decyclers” in this issue, author John Ehlers presents an oscillator based on a second-order high-pass filtering technique. A ready-to-use AmiBroker formula is shown here. The formula is written so it works with any AmiBroker version, but users of the most recent version may uncomment the part that uses the newly introduced IIR function for speed. To use the oscillator, enter the code in the formula editor and press the apply indicator button. You can adjust the exponential average period and the RSI smoothing period using the parameters window.
A sample chart is shown in Figure 6.
FIGURE 6: AMIBROKER. Here is a daily chart of the SPY with decycle oscillators 125/1.0 and 100/1.2, which replicates one of the charts from John Ehlers’ article in this issue.
AMIBROKER CODE LISTING.
SetBarsRequired( sbrAll );
function HighPass( input, alpha )
{
output = input;
for( i = 2; i < BarCount; i++ )
{
output[ i ] = ( 1 - alpha/2 ) ^ 2 *
( input[ i ] - 2 * input[ i - 1 ] + input[ i -2 ] ) +
2 * ( 1 - alpha ) * output[ i - 1 ] -
( 1 - alpha ) ^ 2 * output[ i - 2 ];
}
return output;
}
// newest version of AMiBroker (6.0) may use built-in IIR function instead
// - uncomment function below
/*
function HighPass( input, alpha )
{
b0 = ( 1 - alpha/2 ) ^ 2;
a1 = 2 * ( 1 - alpha );
a2 = - ( 1 - alpha ) ^ 2;
return IIR( input, b0, a1, -2 * b0, a2, b0 );
}
*/
function DecycleOsc( HPPeriod, K )
{
alpha1 = 0;
alpha2 = 0;
HP = 0;
Decycle = 0;
// hipass filter
PI = 3.1415926;
angle1 = 0.707 * 2 * PI / HPPeriod;
angle2 = 0.707 * 2 * PI / ( 0.5 * HPPeriod );
alpha1 = ( cos( angle1 ) + sin( angle1 ) - 1 ) / cos( angle1 );
alpha2 = ( cos( angle2 ) + sin( angle2 ) - 1 ) / cos( angle2 );
HP = HighPass( Close, alpha1 );
Decycle = Close - HP;
return 100 * K * HighPass( Decycle, alpha2 );
}
Plot( DecycleOsc( 125, 1 )/Close, "DecycleOsc(125,1.0)",
colorRed, styleThick );
Plot( DecycleOsc( 100, 1.2 )/Close, "DecycleOsc(100,1.2)",
colorYellow, styleThick );
The quotient decycler and decycler oscillator indicators presented by John Ehlers in his article in this issue (“Decyclers”) can be easily implemented in NeuroShell Trader using NeuroShell Trader’s ability to call external dynamic linked libraries. Dynamic linked libraries may be written in C, C++, Power Basic, or Delphi.
After moving the code given in Ehlers’ article sidebar to your preferred compiler and creating a DLL, you can insert the resulting indicators as follows:
Similar filter and cycle-based strategies can also be created using indicators found in John Ehlers’ Cybernetic and MESA91 NeuroShell Trader Add-ons. Users of NeuroShell Trader can go to the Stocks & Commodities section of the NeuroShell Trader free technical support website to download a copy of this or any previous Traders’ Tips.
A sample chart is shown in Figure 7.
FIGURE 7: NEUROSHELL TRADER. This NeuroShell Trader chart displays the decycler and decyler oscillator indicators.
The TradersStudio code based on John Ehlers’ article in this issue, “Decyclers,” can be found at: www.TradersEdgeSystems.com/traderstips.htm.
The following code files are provided in the download:
Figure 8 shows the two indicators plotted on a chart of the S&P 500 futures contract (SP) using data from Pinnacle Data Corp.
FIGURE 8: TRADERSSTUDIO. Here, the decycler indicators are shown on a chart of S&P 500 futures contract (SP).
The code is shown here as well as at the TradersEdgeSystems.com website.
'DECYCLERS 'Author: John F. Ehlers, TASC, Sept 2015 'Coded by: Richard Denning, 7/12/15 'www.TradersEdgeSystems.com 'HIGHPASS FILTER Function EHLERS_DECYCLER(HPPeriod) 'HPPeriod=125 Dim alpha1 Dim HP As BarArray If Cos(DegToRad(0.707*360/HPPeriod)) <> 0 Then alpha1 = (Cos(DegToRad(0.707*360/HPPeriod))+Sin(DegToRad(0.707*360/HPPeriod))-1)/Cos(DegToRad(0.707*360/HPPeriod)) End If HP = (1-alpha1/2)*(1-alpha1/2)*(C-2*C[1]+C[2])+2*(1-alpha1)*HP[1]-(1-alpha1)*(1-alpha1)*HP[2] EHLERS_DECYCLER = C - HP End Function '----------------------------------------------------------------------------------------------- Sub EHLERS_DECYCLER_IND(HPPeriod) Dim Decycle As BarArray Decycle = EHLERS_DECYCLER(HPPeriod) Plot1(Decycle) Plot2(1.005*Decycle) Plot3(0.995*Decycle) End Sub '------------------------------------------------------------------------------------------------ function EHLERS_DECYCLER_OSC(HPPeriod) 'HPPeriod=125,K=1 Dim Decycle As BarArray Dim alpha2 As BarArray Dim DecycleOsc As BarArray Decycle = EHLERS_DECYCLER(HPPeriod) alpha2=(Cos(DegToRad(0.707*360/(0.5*HPPeriod)))+Sin(DegToRad(0.707+360/(0.5*HPPeriod))-1))/Cos(DegToRad(0.707-360/(0.5*HPPeriod))) DecycleOsc=(1-alpha2/2)*(1-alpha2/2)*(Decycle-2*Decycle[1]+Decycle[2])+2*(1-alpha2)*DecycleOsc[1]-(1-alpha2)*(1-alpha2)*DecycleOsc[2] EHLERS_DECYCLER_OSC=DecycleOsc End Function '-------------------------------------------------------------------------------------------------- sub EHLERS_DECYCLER_OSC_IND(HPPeriod,K) Dim DecycleOsc As BarArray DecycleOsc = EHLERS_DECYCLER_OSC(HPPeriod) Plot1(100*K*DecycleOsc/C) Plot2(0) End Sub '--------------------------------------------------------------------------------------------------
The simple decycler and decycler oscillator indicators described by John Ehlers in his article in this issue, “Decyclers”, has been made available for download at www.ninjatrader.com/SC/September2015SC.zip.
Once you have downloaded them, from within the NinjaTrader Control Center window, select the menu File → Utilities → Import NinjaScript and select the downloaded file. This file is for NinjaTrader version 7.
You can review the indicators’ source code by selecting the menu Tools → Edit NinjaScript → Indicator from within the NinjaTrader Control Center window and selecting either the SimpleDecycler or DecyclerOscillator file.
NinjaScript uses compiled DLLs that run native, not interpreted, to provide the highest possible performance.
A sample chart displaying the indicators is shown in Figure 9.
FIGURE 9: NINJATRADER. The decycler oscillator and simple decycler are displayed together on this sample SPY daily chart ended December 2014.
In “Decyclers” in this issue, author John Ehlers develops an oscillator that signals trend reversals with almost zero lag via digital signal processing techniques. A high-pass filter is subtracted from the input data and the high-frequency components are removed via cancellation of terms. Lower-frequency components are filtered from the output, so they are not canceled from the original data. Thus, the decycler displays them with close to zero lag.
The Updata code for both indicators is in the Updata library and may be downloaded by clicking the custom menu and indicator library. Those who cannot access the library due to a firewall may paste the code shown here into the Updata custom editor and save it.
'Decyclers DISPLAYSTYLE 3LINES INDICATORTYPE TOOL COLOUR RGB(200,0,0) COLOUR2 RGB(0,0,200) COLOUR3 RGB(0,0,200) PARAMETER "Period" #PERIOD=125 NAME "Decycler [" #PERIOD "]" "" @ALPHA1=0 @HP=0 @DECYCLE=0 FOR #CURDATE=0 TO #LASTDATE 'HIGHPASS FILTER @ALPHA1=1+(SIN(0.707*2*CONST_PI/#PERIOD)-1)/COS(0.707*2*CONST_PI/#PERIOD) @HP=(1-@ALPHA1/2)*(1-@ALPHA1/2)*(CLOSE-2*CLOSE(1)+CLOSE(2))+2*(1-@ALPHA1)*HIST(@HP,1)-(1-@ALPHA1)*(1-@ALPHA1)*HIST(@HP,2) 'DECYCLE THE DIFFERENCE BETWEEN INPUT AND HP DATA @DECYCLE=CLOSE-@HP @PLOT=@DECYCLE @PLOT2=1.005*@DECYCLE @PLOT3=0.995*@DECYCLE NEXT 'DecyclerOscillator DISPLAYSTYLE 2LINES INDICATORTYPE CHART COLOUR RGB(200,0,0) COLOUR2 RGB(0,0,200) COLOUR3 RGB(0,0,200) PARAMETER "Period" #PERIOD=125 PARAMETER "K" @K=1 NAME "Decycler Osc. [" #PERIOD "] x [" @K "]" "" @ALPHA1=0 @ALPHA2=0 @HP=0 @DECYCLE=0 @DECYCLEOSC=0 FOR #CURDATE=0 TO #LASTDATE 'HIGHPASS FILTER @ALPHA1=1+(SIN(0.707*2*CONST_PI/#PERIOD)-1)/COS(0.707*2*CONST_PI/#PERIOD) @HP=(1-@ALPHA1/2)*(1-@ALPHA1/2)*(CLOSE-2*CLOSE(1)+CLOSE(2))+2*(1-@ALPHA1)*HIST(@HP,1)-(1-@ALPHA1)*(1-@ALPHA1)*HIST(@HP,2) 'DECYCLE THE DIFFERENCE BETWEEN INPUT AND HP DATA @DECYCLE=CLOSE-@HP 'HIGHPASS FILTER OF DECYCLE TO CREATE THE OSC. @ALPHA2=1+(SIN(0.707*2*CONST_PI/(#PERIOD*0.5))-1)/COS(0.707*2*CONST_PI/(#PERIOD*0.5)) @DECYCLEOSC=(1-@ALPHA1/2)*(1-@ALPHA1/2)*(@DECYCLE-2*HIST(@DECYCLE,1)+HIST(@DECYCLE,2))+2*(1-@ALPHA1)*HIST(@DECYCLEOSC,1)-(1-@ALPHA1)*(1-@ALPHA1)*HIST(@DECYCLEOSC,2) @PLOT=100*@K*@DECYCLEOSC/CLOSE @PLOT2=0 NEXT
A sample chart is shown in Figure 10.
FIGURE 10: UPDATA. This chart shows the decycler oscillator [100][1.2] as applied to the SPY ETF of daily resolution.
In his article in this issue, titled “Decyclers,” author John Ehlers presents a simple, interesting new way to use the high-pass filter concept that he has discussed before in previous articles and contexts. The idea is to subtract the high-pass filter value from the current close to get a “decycled” indicator that follows the trend rather well by removing much of the distracting high-frequency chatter. Apply a second high-pass filter using half the period from the first filter to the decycled indicator and you get a smoother result with much-reduced lag.
Divide this second result by the close value and you have an oscillator whose turning points provide very good sensitivity to trend turning points of our data—perhaps even better (with a bit less lag) than the base decycled indicator.
Ehlers suggests calculating two such oscillators with differing high-pass periods and plotting them with appropriate scaling. Then use the crossover points to confirm trend changes.
As shown on my oscillator plot in Figure 11, I find that it is also interesting to plot the delta of the two oscillators as a visual indication of the potential current strength of the indicated trend.
FIGURE 11: EXCEL, SPY. Here is an Excel-produced composite, which approximates Figures 1 & 2 from John Ehlers’ article in this issue. The date range used here is 12/19/2013 to 12/03/2014.
Figure 12 shows the five user-adjustable control values for the decycler and oscillator computations.
FIGURE 12: EXCEL, USER CONTROLS. This shows the user controls: decycler periods, scale factors, and band spread.
In Ehlers’ article sidebar, he presents formulas for the high-pass filter and oscillator. In the formulas, there are eight computational factors that remain constant once the high-pass period has been selected. I chose to compute these once and use the results in the indicator cell formulas. This approach saves computational time and physical space in memory and on disk.
Figure 13 shows the corresponding constants for the second oscillator computations. These can be found to the right of the charts.
FIGURE 13: EXCEL, COMPUTATIONS. This shows the “constants” for the second oscillator computations.
The spreadsheet file for this Traders’ Tip can be downloaded here. To successfully download it, follow these steps: