Cybernetic Analysis »

John F. Ehlers received his BSEE and MSEE from the University of Missouri and did his doctoral work at the George Washington University, majoring in fields and waves and minoring in information theory. A private trader since 1976, he is currently President of MESA Software (www.mesasoftware.com) and author of Rocket Science for Traders (Wiley) as well as numerous articles for Futures and Technical Analysis of Stocks & Commodities magazines. He has now expanded the scope of his contributions to technical analysis through the application of scientific digital signal processing techniques.

"While much of what is covered in this book breaks new ground, it is not simply innovation for innovation’s sake. Rather, it is intended to challenge conventional wisdom and illuminate the shortcomings of many prevailing approaches to systems development."
--From Chapter 1

John Ehlers’s contributions to the art and science of trading have been nothing short of extraordinary. From his pioneering work applying maximum entropy spectral analysis (MESA) software to trading markets, to his definitive tour de force Rocket Science for Traders, Ehlers’s innovative and market-proven approach to cycle analysis and market forecasting has earned him a reputation that is unmatched among technicians and technical traders worldwide.

In Cybernetic Analysis for Stocks and Futures, Ehlers takes the next step, developing and demonstrating profoundly effective new trading tools through the application of modern digital signal processing techniques. Obtaining accurate cycle measurements within five samples with virtually zero lag, these tools have proven in real-time use to consistently provide traders with razor-sharp buy and sell signals in virtually any market--meeting or exceeding the performance of commercial systems which cost hundreds or even thousands of dollars.

To increase the book’s functionality and ease of use, each new technique, indicator, and automatic trading system is defined in both EasyLanguage code (for use in TradeStation™) and eSignal Formula Script (EFS) code. DLLs to work with NeuroShell Trader are also available. Modernizing popular trading procedures to take advantage of the incredible computing speed and power available to today’s trader, Ehlers introduces:

• The Fisher Transform--ensure that the density function of any indicator is Gaussian, creating sharper trading signals
• The Relative Vigor Index--a responsive oscillator in which movement is normalized to the trading range of each bar
• Improved Hilbert Transform--a more responsive method to accurately measure market cycles
• The Sinewave Indicator--a non-causal filter that gives entry and exit signals 1/16 of a cycle period in advance of the turning point
• The Laguerre Transform--a new tool to address the smoothing versus lag problem more effectively and create better smoothing filters
• Super Smoothing Filters--provide more smoothing with less lag
• Simple Moving Average Computations--two new ways to compute the simple moving average with unprecedented ease

Advances made in computer technology in the past two decades have clearly outpaced advances in trading software and practice. Cybernetic Analysis for Stocks and Futures seeks to restore the balance between computational power and user proficiency. Combining new indicators with tested systems for forecasting stock and futures markets with surgical precision, it will drive your systems to new levels of predictive accuracy, trading effectiveness, and overall profitability.