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Simple Decycler

by QuantShare, 3126 days ago
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The Simple Decycler is a study created by John Ehlers and presented in the
The idea behind this virtually zero-lagged trading indicator is that the market data can be considered as a continuum of cycle periods each one with a different cycle amplitude. Trending periods could be considered as segments of low-frequency segments.

With the right filter, we can identify these segments. By eliminating the price data from the high-pass filter output, we eliminate high-frequency components from the price and keep the low-frequency ones (trends).
Because the high-pass filters are almost lag-free, the simple decycler generates low-frequency components that has little to no lag.

In addition, with the simple decycler line, we also need to plot two lines that are 0.5% above and below it. These bands are called hysteresis band by John Ehlers and are used to help the trader identify the trend.
The interpretation is as follows: stocks that are trading above the upper hysteresis line are in an uptrend and, those below the lower line are in a downtrend. Stocks whose price is within the hysteresis band should be considered to be trend-neutral.

The hysteresis lines are plotted with the simple decycler code. All you have to do is add those lines to the chart's formula to plot the simple decycler technical indicator (Right click on the chart then select "Edit Formula"):

decycle= decycler(125);
plot(decycle, "Simple Decycler", colorRed);


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Type: Trading Indicator

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