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The Laguerre indicator for cyclical fluctuations in the Forex market
The Laguerre indicator has been developed by the famous researcher of cyclical fluctuations John Ehlers, who even published a book "Cybernetic analysis of the stock and futures markets", therefore it is not difficult to guess that the main task of this algorithm is to find market cycles.
To understand why such attention was paid to Ehlers cyclic analysis is sufficient to recall facts from his biography. By education John is an engineer, his diploma he received in 70-e years, after which for many years served the equipment intended for transmission and reception of signals from aircraft.
As is known, these signals have a wave nature, so the elers, passionate about their profession, put a lot of effort to develop methods of predicting future cycles on the basis of a limited set of historical data. But if today in the technique of such studies may seem unnecessary, in the financial markets they successfully "fit" in the overall picture.
Ehlers himself noted that cyclical fluctuations can be described only 15% of all trading time, but, first, this is the result, and secondly, that such frequency of appearance of cycles and provides the opportunity to earn them. If every market participant will see the phase to make (logically) have absolutely everything that we know to be impossible.
Configuration and application of the Laguerre indicator Forex
The discussed indicator was named in honor of the French mathematician and lagers, as Ehlers was used in the calculations of the appropriate conversion, also sometimes it can be found under the name of RSI Laguerre. The first version of the algorithm for Metatrader 4 platform appeared until 2009, and now the expert is optimized for the 4 and 5 versions of the terminal and is freely available.
To configure the indicator Ehlers, it is sufficient to specify only two values:
• Gamma is the measure, what it is, the longer the cycle will be built. Here we should consider one thing - in the network there is an opinion that, say, this variable is responsible for smoothing the lines are not quite right;
• CountBars – depth story that indicator will show on the chart.
The laguerre indicator in Forex trading
Not hard to guess that the scripts work with the Laguerre indicator may be several, and the first of them is trading from the extreme borders. The picture above shows an example of a product exit line from the oversold zone, and sales at the exit from the overbought.
The advantage of this approach lies in its simplicity, but, alas, in the distance, the expectation of such transactions is negative, as plenty of the countertrend signals, and we should not forget the warning of Alresa about the frequency of manifestations of cycles.
To resolve weaknesses, you need to add to the Laguerre indicator any identifier of the trend, it can be another indicator (MA, CCI, etc.), complex Fibonacci analysis and many other methods.
The second scenario – trade at the intersection of the main line of the indicator signal. To do this, we set the schedule for the Ehlers algorithm, then select in the Navigator ubiquitous and universal Moving Average and touches her on the Laguerre indicator (using the command "previous indicator's data" in the list "apply to"), the result of the operation we get the following picture:
The principle of operation in this case is virtually indistinguishable from the first scenario, but because the smoothing MA the number of false alarms is significantly reduced.
And the last option operate the indicator closest to the initial objectives of the research ELISA, it is the analysis of cycles and trends, however on a rather primitive level.
The cycle in this case is deemed "stuck" Laguerre extreme borders, in particular, if the indicator value is above 0.8 – you can talk about the power buyers, if it is below 0.2 – the power sellers. Situations in which the value of the indicator is enclosed in the range from 0.2 to 0.8 should be regarded as an intermediate state.
For a more complete picture analysts often use several expert advisors with different settings, that is, analyze the whole spectrum of waves. As example the following situation:
In this case, each line shows the development of an individual cycle, respectively, the older "gamma", the longer the cycle goes. From a practical point of view, such markings may indicate the following situation:
• if all loops are in the same phase, it is a signal to buy (or sell) in a given direction;
• if the short-term cycle began to contradict the long-term is a reason to reduce risk in transactions;
• if the short-term and medium-term cycles long-term contrary – wise to switch to a different timeframe, and it is better to trade other currency pair or asset until the picture becomes clearer.
Thus, the Laguerre indicator is a versatile tool that can be applied for the analysis of cycles, and as a conventional signal oscillator, its only drawback is the time lag, but here you can experiment on Renko charts.
|Category: Binary options | Added by: (07.11.2017)