Stocks & Commodities V. 38:07 (20–23): Truncated Indicators by John F. Ehlers

Truncated Indicators by John F. Ehlers

An ideal cycle indicator is one that will help you locate and track cycles in price data to better anticipate price. Here is a straightforward technique for improving how accurately a cycle indicator reflects price—including the handling of extreme price events such as the market experienced recently. Coding is provided to help you implement the technique.

The performance of some, but not all, indicators can be greatly enhanced by truncation. By “truncation,” I am referring to limiting the data range automatically in ways that allow the indicator to more accurately reflect price.

But which indicators can be enhanced by it, and why? In this article, I’ll tell you the type of indicator that can benefit from this mathematical technique, and I’ll show you a way to perform the truncation ...