TRADERS’ TIPS
For this month’s Traders’ Tips, the focus is John Ehlers’ article in this issue, “The Reverse EMA Indicator.” Here, we present the September 2017 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 “The Reverse EMA Indicator” in this issue, author John Ehlers presents a causal forward and backward EMA indicator that can be used in real trading. It has double smoothing at the high end of the spectrum to reduce aliased components and is able to mitigate the impact of spectral dilation at the low end. The author describes the indicator as having unique flexibility in that it can display trend or cycle information by varying the alpha parameter and do this with very low lag.
Here, we are providing a function for calculating the reverse EMA that you can use in your own code. In addition, we have provided an example strategy and a demonstration indicator.
Function: _ReverseEMA
{
Adapted from
Reverse EMA Indicator
(C) 2017 John F. Ehlers
TASC Sep 2017
}
Inputs:
AA( numericsimple ) ;
Vars:
CC( 0 ),EMA( 0 ),RE1( 0 ),RE2( 0 ),
RE3( 0 ),RE4( 0 ),RE5( 0 ),RE6( 0 ),
RE7( 0 ),RE8( 0 ),Wave( 0 ) ;
//Classic EMA
CC = 1 - AA ;
EMA = AA * Close + CC * EMA[1] ;
//Compute Reverse EMA
RE1 = CC * EMA + EMA[1] ;
RE2 = Power( CC, 2 ) * RE1 + RE1[1] ;
RE3 = Power( CC, 4 ) * RE2 + RE2[1] ;
RE4 = Power( CC, 8 ) * RE3 + RE3[1] ;
RE5 = Power( CC, 16 ) * RE4 + RE4[1] ;
RE6 = Power( CC, 32 ) * RE5 + RE5[1] ;
RE7 = Power( CC, 64 ) * RE6 + RE6[1] ;
RE8 = Power( CC, 128 ) * RE7 + RE7[1] ;
//Indicator as difference
Wave = EMA - AA * RE8 ;
_ReverseEMA = Wave ;
Strategy: ReverseEMA
{
Reverse EMA Strategy
(C) 2017 John F. Ehlers
TASC Sep 2017
}
inputs:
Trend( .05 ),
Cycle( .3 ) ;
variables:
CycleRevEMA( 0 ),
TrendRevEMA( 0 ) ;
TrendRevEMA = _ReverseEMA( Trend ) ;
CycleRevEMA = _ReverseEMA( Cycle ) ;
if TrendRevEMA > 0 and
CycleRevEMA crosses over 0 then
Buy next bar at Market ;
if TrendRevEMA crosses under 0 or
CycleRevEMA crosses under 0 then
Sell next bar at market ;
if TrendRevEMA < 0 and
CycleRevEMA crosses under 0 then
Sell Short next bar at Market ;
if TrendRevEMA crosses over 0
or CycleRevEMA crosses over 0 then
Buy to cover next bar at market ;
Indicator: ReverseEMA
{
Reverse EMA Indicator
(C) 2017 John F. Ehlers
TASC Sep 2017
}
inputs:
Trend( .05 ),
Cycle( .3 ) ;
variables:
CycleRevEMA( 0 ),
TrendRevEMA( 0 ),
AvgTrend( 0 ) ;
TrendRevEMA = _ReverseEMA( Trend ) ;
CycleRevEMA = _ReverseEMA( Cycle ) ;
AvgTrend = Average( TrendRevEMA, 10 ) ;
Plot1( TrendRevEMA, "Trend", Green ) ;
Plot2( CycleRevEMA, "Cycle", Red ) ;
Plot3( 0, "ZL", Blue ) ;
To download the EasyLanguage code, please visit our TradeStation and EasyLanguage support forum. The files for this article can be found at https://community.tradestation.com/Discussions/Topic.aspx?Topic_ID=142776. The filename is “TASC_SEP2017.ZIP.”
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. This shows a TradeStation daily chart of GLD with the reverse EMA strategy and indicator applied.
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 “The Reverse EMA Indicator” in this issue, John Ehlers presents an oscillator to identify cycles, momentum, or trend activity. The MetaStock formula for implementing this indicator is shown here:
alpha:= 0.1; ca:= 1-alpha; ma:= (alpha * C) + (ca*PREV); re1:= ca*ma + Ref(ma, -1); re2:= Power(ca,2)*re1 + Ref(re1,-1); re3:= Power(ca,4)*re2 + Ref(re2,-1); re4:= Power(ca,8)*re3 + Ref(re3,-1); re5:= Power(ca,16)*re4 + Ref(re4,-1); re6:= Power(ca,32)*re5 + Ref(re5,-1); re7:= Power(ca,64)*re6 + Ref(re6,-1); re8:= Power(ca,128)*re7 + Ref(re7,-1); ma - (alpha*re8); 0
For this month’s Traders’ Tip, we’ve provided the study Reverse_EMA.efs based on the formula described in John Ehlers’ article in this issue, “The Reverse EMA Indicator.” In the article, Ehlers presents an indicator based on the exponential moving average (EMA) that minimizes lag inherent in the conventional version of the indicator.
The study contains formula parameters that may be configured through the edit chart window (right-click on the chart and select edit chart). A sample chart is shown in Figure 2.
FIGURE 2: eSIGNAL. Here is an example of the study plotted on a daily chart of SPY.
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 shown below.
/*********************************
Provided By:
eSignal (Copyright c eSignal), a division of Interactive Data
Corporation. 2016. All rights reserved. This sample eSignal
Formula Script (EFS) is for educational purposes only and may be
modified and saved under a new file name. eSignal is not responsible
for the functionality once modified. eSignal reserves the right
to modify and overwrite this EFS file with each new release.
Description:
The Reverse EMA Indicator by John F. Ehlers
Version: 1.00 07/12/2017
Formula Parameters: Default:
Alpha 0.1
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(){
setPriceStudy(false);
var x=0;
fpArray[x] = new FunctionParameter("Alpha", FunctionParameter.NUMBER);
with(fpArray[x++]){
setName("Alpha Value");
setDefault(0.1);
setLowerLimit(0);
}
}
var bInit = false;
var bVersion = null;
var xClose = null;
var xEMA = null;
var xRevEMA = null;
function main (Alpha){
if (bVersion == null) bVersion = verify();
if (bVersion == false) return;
var nLength = ((2 / Alpha) - 1) * 3;
if (getCurrentBarCount() < nLength) return;
if (getBarState() == BARSTATE_ALLBARS){
bInit = false;
}
if (!bInit){
xClose = close();
xEMA = efsInternal("calc_EMA", Alpha, xClose);
xRevEMA = efsInternal("calc_RevEMA", (1 - Alpha), 1, xEMA);
var power = 2;
for (var i = 0; i < 7; i++){
xRevEMA = efsInternal("calc_RevEMA", (1 - Alpha), power, xRevEMA);
power *= 2;
}
addBand(0, PS_DASH, 1, Color.grey, 1);
bInit = true;
}
if (xRevEMA.getValue(0) != null){
return (xEMA.getValue(0) - 0.1 * xRevEMA.getValue(0));
}
}
function calc_EMA(nAA, xSeries){
var nEMA_1 = ref(-1);
if (nEMA_1 == null) nEMA_1 = 0;
var nEMA = ((xSeries.getValue(0) - nEMA_1) * nAA) + nEMA_1;
if (nEMA != null) return nEMA;
}
function calc_RevEMA(nCC, power, xSeries){
if (xSeries.getValue(-1) == null) return;
var nRevEMA = Math.pow(nCC, power) * xSeries.getValue(0) + xSeries.getValue(-1);
if (nRevEMA != null) return nRevEMA;
}
function verify(){
var b = false;
if (getBuildNumber() < 779){
drawTextAbsolute(5, 35, "This study requires version 10.6 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;
}
Once again, John Ehlers, in his article in this issue, shares an universal oscillator with features such as minimum lag and a single-input parameter that lets it highlight cycle, momentum, and trend components.
To use the ReverseEMA indicator, first update your TASCIndicators library to v2017.08 or later and then look under the TASC Magazine Indicators group. You can plot the indicator on a chart or use it as an entry or exit condition in a rule-based strategy without having to program any code yourself.
Get the companion strategy’s C# code by downloading it right from Wealth-Lab’s open strategy dialog:
using System;
using System.Collections.Generic;
using System.Text;
using System.Drawing;
using WealthLab;
using WealthLab.Indicators;
using TASCIndicators;
namespace WealthLab.Strategies
{
public class TASC201709 : WealthScript
{
private StrategyParameter paramAlpha;
public TASC201709()
{
paramAlpha = CreateParameter("Alpha", 0.1, 0.05, 0.5, 0.05);
}
protected override void Execute()
{
var re = ReverseEMA.Series(Close, paramAlpha.Value);
ChartPane rePane = CreatePane( 30,false,false );
HideVolume();
PlotSeries( rePane, re, Color.Red, LineStyle.Solid, 2);
//RoofingFilter for comparison
var rf = RoofingFilter.Series(Close);
ChartPane rfPane = CreatePane( 25,false,false);
PlotSeries( rfPane,rf,Color.DarkBlue,LineStyle.Solid,1);
}
}
}
A sample chart is shown in Figure 3.
FIGURE 3: WEALTH-LAB. Here, we show application of the indicator to SPY in comparison to Ehlers’ RoofingFilter.
In “The Reverse EMA Indicator” in this issue, author John Ehlers presents very interesting filtering technique based on a Z-transform of the exponential moving average.
A ready-to-use AmiBroker formula that implements the reverse EMA algorithm is given here. To use it, enter the formula in the formula editor and press apply indicator to create a chart such as the one shown in Figure 4, which replicates a chart from Ehlers’ article. You can adjust the smoothing factor using the parameter window.
FIGURE 4: AMIBROKER. This daily SPY chart (upper pane) with the reverse EMA in the lower pane replicates a chart from John Ehlers’ article in this issue. The reverse EMA reflects price turning points with little lag.
_SECTION_BEGIN("ReverseEMA");
function ReverseEMA( alpha )
{
beta = 1 - alpha;
re = eema = AMA( C, alpha );
for( i = 1, p = 1; i <= 8; i++, p *= 2 )
re = re * ( beta ^ p ) + Ref( re, -1 );
return eema - alpha * re;
}
alpha = Param("alpha", 0.1, 0.01, 0.99, 0.01 );
Plot( ReverseEMA( alpha ) , _DEFAULT_NAME(), colorRed );
Plot( 0, "", colorBlue, styleNoLabel );
_SECTION_END();
The reverse EMA indicator discussed in John Ehlers’ article in this issue, “The Reverse EMA Indicator,” can be easily implemented in NeuroShell Trader using NeuroShell Trader’s ability to call external dynamic linked libraries. Dynamic linked libraries can be written in C, C++, and Power Basic.
After moving the EasyLanguage code given in Ehlers’ article to your preferred compiler and creating a DLL, you can insert the resulting indicators as follows:
Similar filter-based 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 5.
FIGURE 5: NEUROSHELL TRADER. This sample NeuroShell Trader chart shows the reverse EMA indicator.
The TradersStudio code I am presenting here is based on John Ehlers’ article in this issue, “The Reverse EMA Indicator.”
The code will be available at www.TradersEdgeSystems.com/traderstips.htm and is also shown here:
'THE REVERSE EMA INDICATOR, TASC Sept 2017
'Author: John Ehlers
'Coded by: Richard Denning, 7/12/17
'www.TradersEdgeSystems.ocm
Function EHLERS_REVERSE_EMA(AA)
'AA = .1
Dim CC
Dim EMA As BarArray
Dim RE1 As BarArray
Dim RE2 As BarArray
Dim RE3 As BarArray
Dim RE4 As BarArray
Dim RE5 As BarArray
Dim RE6 As BarArray
Dim RE7 As BarArray
Dim RE8
Dim Wave
CC = 1 - AA
EMA = AA*Close + CC*EMA[1]
RE1 = CC*EMA + EMA[1]
RE2 = (CC^2)*RE1 + RE1[1]
RE3 = (CC^4)*RE2 + RE2[1]
RE4 = (CC^8)*RE3 + RE3[1]
RE5 = (CC^16)*RE4 + RE4[1]
RE6 = (CC^32)*RE5 + RE5[1]
RE7 = (CC^64)*RE6 + RE6[1]
RE8 = (CC^128)*RE7 + RE7[1]
Wave = EMA - AA*RE8
EHLERS_REVERSE_EMA = Wave
End Function
The following code files are included in the download:
Figure 6 shows the indicator on a chart of Apple Inc. for part of 2013 and 2014.
FIGURE 6: TRADERSSTUDIO. Shown here is the reverse EMA indicator plotted on a chart of Apple Inc. for part of 2013 and 2014.
The Traders’ Tip for this month is based on the article in this issue by John Ehlers, “The Reverse EMA Indicator.” In the article, Ehlers proposes some refinements to the classic exponential moving average (EMA), reverse-engineering the formula to remove any lag, to create a causal forward and backward indicator that can be used on real-time data.
FIGURE 7: UPDATA. Here is the reverse-engineered exponential moving average as applied to the SPY ETF in daily resolution data.
The Updata code for this article 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.
PARAMETER "AA" @AA=0.1 NAME "" "" @CC=0 @EMA=0 @RE1=0 @RE2=0 @RE3=0 @RE4=0 @RE5=0 @RE6=0 @RE7=0 @RE8=0 @WAVE=0 FOR #CURDATE=0 TO #LASTDATE @CC=1-@AA @EMA=(@AA*CLOSE)+(@CC*HIST(@EMA,1)) 'COMPUTE REVERSE @RE1=(@CC*@EMA)+HIST(@EMA,1) @RE2=EXPBASE(@CC,2)*@RE1+HIST(@RE1,1) @RE3=EXPBASE(@CC,4)*@RE2+HIST(@RE2,1) @RE4=EXPBASE(@CC,8)*@RE3+HIST(@RE3,1) @RE5=EXPBASE(@CC,16)*@RE4+HIST(@RE4,1) @RE6=EXPBASE(@CC,32)*@RE5+HIST(@RE5,1) @RE7=EXPBASE(@CC,64)*@RE6+HIST(@RE6,1) @RE8=EXPBASE(@CC,128)*@RE7+HIST(@RE7,1) 'INDICATOR AS DIFFERENCE @WAVE=@EMA-@AA*@RE8 @PLOT=@WAVE NEXT
We’re making available a special file for download in the Trade Navigator library to make it easy for users to implement the strategy discussed in “The Reverse EMA Indicator” by John Ehlers in this issue. The filename is “SC201709.”
To download it, click on Trade Navigator’s blue telephone button, select download special file, and replace the word “upgrade” with “SC201709” (without the quotes). Then click the start button. When prompted to upgrade, click the yes button. If prompted to close all software, click on the continue button. Your library will now download. This library contains an indicator named “Reverse EMA.”
If you would like to recreate these indicators manually, click on the edit dropdown menu, open the trader’s toolbox (or use CTRL + T) and click on the functions tab. Next, click on the new button, and a new function dialog window will open. In its text box, input the code for the highlight bar. Ensure that there are no extra spaces at the end of each line. When completed, click on the verify button. You may be presented with an add inputs pop-up message if there are variables in the code. If so, click the yes button, then enter a value in the default value column. If all is well, when you click on the function tab, the code you entered will convert to italic font. Click on the save button, and type a name for the indicator.
Once complete, you can insert these indicators onto your chart by opening the charting dropdown menu, selecting the add to chart command, then on the indicators tab, finding your named indicator, selecting it, then clicking on the add button. Repeat this procedure for additional indicators as well if you wish.
FIGURE 8: TRADE NAVIGATOR. TradeSense code for the indicator is shown.
The TradeSense code for the indicator is shown in Figure 8. A sample chart is shown in Figure 9.
FIGURE 9: TRADE NAVIGATOR. Here, the reverse EMA indicator is plotted on a daily chart.
Users may contact our technical support staff by phone or by live chat if any assistance is needed in using the indicators or strategy.
The reverse EMA indicator, as discussed in “The Reverse EMA Indicator” in this issue by John Ehlers, is available for download from the following links for NinjaTrader 8 and for NinjaTrader 7:
Once the file is downloaded, you can import the indicator into NinjaTader 8 from within the control center by selecting Tools → Import → NinjaScript Add-On and then selecting the downloaded file for NinjaTrader 8. To import into NinjaTrader 7, from within the control center window, select the menu File → Utilities → Import NinjaScript and select the downloaded file.
You can review the indicator’s source code in NinjaTrader 8 by selecting the menu New → NinjaScript Editor → Indicators from within the control center window and selecting the REMA file. You can review the indicator’s source code in NinjaTrader 7 by selecting the menu Tools → Edit NinjaScript → Indicator from within the control center window and selecting the REMA file.
NinjaScript uses compiled DLLs that run native, not interpreted, which provides you with the highest performance possible.
A sample chart implementing the strategy is shown in Figure 10.
FIGURE 10: NINJATRADER. Here is an example of the reverse EMA indicator on a daily SPY chart between June 2016 and July 2017 as displayed in Figure 1 of John Ehlers’ article in this issue, “The Reverse EMA Indicator.”