The universal oscillator introduced in John Ehlers’ article in this issue, “Whiter Is Brighter,” is an evolution of Ehlers’ SuperSmoother filter, which was introduced in his January 2014 STOCKS & COMMODITIES article “Predictive And Successful Indicators”). The new indicator follows the short-term variations in price without introducing extra delay. It is comfortably controlled through just a single input — the bandedge — which basically is frequency. The smaller it is set, the less lag there is, but the smoother the indicator’s outline will be. Built-in automatic gain control normalizes the output to vary between -1 to +1.
As an illustration of its application, a straightforward short-term countertrend system could, for example, use the following rules:
- Cover your short position and go long when the universal oscillator crosses below zero
- Sell and go short when the universal oscillator crosses above zero.
Since it is really a universal oscillator, the indicator can power up a trend-trading system just as easily:
- Buy when the long-term universal oscillator crosses above zero
- Sell when the long-term universal oscillator crosses below zero.
Universal Oscillator:
bandedge:= 20;
whitenoise:= (C - Ref(C,-2))/2;
{super smoother filter}
a1:= Exp(-1.414 * 3.14159 / bandedge);
b1:= 2*a1 * Cos(1.414*180 /bandedge);
c2:= b1;
c3:= -a1 * a1;
c1:= 1 - c2 - c3;
filt:= c1 * (whitenoise + Ref(whitenoise, -1))/2 + c2*PREV + c3*Ref(PREV,-1);
filt1:= If(Cum(1) = 0, 0, If(Cum(1) = 2, c2*PREV,
If(Cum(1) = 3, c2*PREV + c3*Ref(PREV,-1), filt)));
pk:= If(Cum(1) = 2, .0000001,
If(Abs(filt1) > PREV, Abs(filt1), 0.991 * PREV));
denom:= If(pk=0, -1, pk);
If(denom = -1, PREV, filt1/pk)
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