Description
The EhlersStoch strategy is based upon the Ehler's Stochastic study, a Stochastic oscillator with application of the Roofing Filter. The filter and the oscillator are both developed by John F. Ehlers, based on aerospace analog filters.
Two modes of analysis are available for this strategy: conventional and predictive. In conventional mode, a simulated Buy order is added when Ehler's Stochastic crosses above the oversold level and a simulated Sell signal is added when it crosses below the overbought level. For the predictive mode, crossover directions are inverse: simulated Buy order is added when the Stochastic plot crosses below the oversold level and simulated Sell signal is shown when it crosses above the overbought level.
Input Parameters
| Parameter | Description |
|---|---|
price
|
The price to which the filter is applied. |
length
|
The period upon which the highest and the lowest values of the price are found. |
cutoff length
|
Maximum period for a wave cycle to be considered noise. |
over bought
|
Defines the overbought level. |
over sold
|
Defines the oversold level. |
mode
|
Defines whether the conventional or the predictive mode will be used. |
Further Reading
1. "Predictive Indicators for Effective Trading Strategies" by John F. Ehlers. Technical Analysis of Stocks & Commodities, January 2014.
Backtesting is the evaluation of a particular trading strategy using historical data. Results presented are hypothetical, and there is no guarantee that the same strategy implemented today would produce similar results.
Technical analysis is not recommended as a sole means of investment research.
For educational purposes only. Not a recommendation of a specific security or investment strategy.