Creating Indicators With Physics by John F. Ehlers
Do we limit words or do words limit us? As Stocks & Commodities contributor John Ehlers opines, we can't really describe market activity with terms now used in the technical trading field. He suggests a new approach to looking at the market, using as analogy the physical world and as a result, a way to develop sophisticated new indicators.
Every discipline has its jargon. Technical trading is no different. If you doubt that we use jargon, look
up the standard definition of "stochastic" or "momentum" in a dictionary. These definitions have no
relevance to our usage in technical trading. An expanded list of jargon can be found in the glossary
section of this magazine every month. As an engineer, I find the use of the term "oscillator" applied to
things that don ' t oscillate to be particularly inane.
Am I being pedantic? Absolutely not! Words mean things. Many concepts defy direct translation from
one language to another simply because the precise words, the most accurate definition, don't exist in the
The words we use affect the way we think and even affect our very survival . I can illustrate with a couple
of examples. First, Eskimos have more than 25 words for "snow," while just the one word works for me.
That's because my survival in Southern California does not depend on a nuance of the word. Second,
imagine that I'm from another planet and that I see and hear well and I have an excellent grasp of your
language. The problem is, I have no sense of smell. It's your job to describe to me how an onion smells.
You can't do it! Why? You know how it smells. You simply don't have the words to describe the smell
without involving an understanding-of the sense of smell compared with other things that have a scent.