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RE: [EquisMetaStock Group] Re: Synthetic cycles



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Jose,

 

Sure there are weaknesses to Ehler’s approach. When I said that I’ve found it good for practical purposes, I meant that it’s the best way that I’ve found for measuring the very shortest tradeable cycles. It’s no good for anything else, like deciphering larger cycles with respect to interpreting trading ranges – for the reasons you point out.

 

Yes, the basic premise that the next short cycle is going to be a similar frequency to the last can be argued with…but it’s a better premise than saying that you have absolutley no clue what it might be. At least, that’s my experience – both in testing and in live trading. You have to make some assumptions about the market surely? I mean, when you start using any kind of TA you are picking up the assumption that “history will repeat itself”. If you don’t agree with that then you don’t agree with a cornerstone on which TA itself is built!

 

The thing about it is that it’s *different*…i.e. it gives you another layer of information which you didn’t have before. And, seeing as we’ve established already that there is huge commonality between most indicators, that characteristic makes it worth considering at least. But, as with every indicator and technique out there though, you have to know what it’s doing, how it’s doing it and, most importantly, what it *isn’t* doing. And then use it properly.

 

I’ve found that it dramatically improves the reliablilty and responsiveness of some indicators when applied as a variable input to the period function (with the correct limiting parameters). If I stir a little hornet’s nest of my own here(!) – it’s also improved my divergence indicator performance significantly, particularly the RSI variation and particularly when you plot the indicator next to the signals – one can *see* the suspect signals much more clearly because the oscillator starts going ballistic in high-noise areas (high noise meaning shorter cycles meaning faster oscillator). Anyway, that’s another story…

 

As Ehler said in his most recent book. Why should we use a 14-bar period for the RSI, or any other fixed period on any other indicator? Surely it makes more sense to adapt the indicator to the current market conditions? I’ve found this to be a valid question and his answer to be pretty good one. The Cyber Cycle is responsive enough to make it practically useful. However, again as always, there are limitations that have to be borne in mind when you come to use it…

 

 

 


From: equismetastock@xxxxxxxxxxxxxxx [mailto:equismetastock@xxxxxxxxxxxxxxx] On Behalf Of Jose Silva
Sent: Saturday, September 10, 2005 2:10 AM
To: equismetastock@xxxxxxxxxxxxxxx
Subject: [EquisMetaStock Group] Re: Synthetic cycles

 

> I've found Ehler's Cyber Cycle measurement to be very good for
> practical purposes as he starts off with the assumption that, yes
> there may be lots of cycles going on at any one time but there is
> only one dominant/tradeable cycle.and the indicator attempts to
> measure that.

Andy, I wouldn't count on this assumption.  It is likely that the
dominant cycle itself may be composed of several major influences.

An objective observer would only need to take a look at any market's
trading range - is there no dominant cycle at play here, or could it
be that there are two or more influences, balancing & canceling each
other out?

Base assumptions about the markets can be dangerous stuff - it can
lead to a lifetime of pursuits based on little that resembles the
reality of the markets.  One only needs to take a look at Gann "market
cycles". Fib, etc, to see this.
Ooopsey, now I've stirred the hornets' nest.  :)


jose '-)
http://www.metastocktools.com




--- In equismetastock@xxxxxxxxxxxxxxx, "Andy" <AndyDavidson@xxxx>
wrote:
> MG,
>
> Agree that Fourier is maybe alright if you're looking at the big
> picture.
> But the restrictions on stationarity mean that it's useless for
> short cycles on small data sets. I've used it to find a suitable
> periodicity for a Centered MA with fixed-width envelopes. Which is a
> tool that's only any use for 'eyeballing' the major cycles since you
> have to extrapolate it to the right hand edge.
>
> I've found Ehler's Cyber Cycle measurement to be very good for
> practical purposes as he starts off with the assumption that, yes
> there may be lots of cycles going on at any one time but there is
> only one dominant/tradeable cycle.and the indicator attempts to
> measure that.
>
>
> Andy
>
>
>   _____ 






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