One of the
most unpleasant moments in trading in the application of technical analysis is
the balance between smoothing and delay in the testimony of indicators. In
order to filter out sharp noises necessary to increase the smoothing period,
but then when changing the trend will be delayed signal. The smaller the
smoothing, the more false signals will be occur. How to minimize the effect of
noise and do not miss the beginning of a new trend? This will help us to Laguerre
Indicator, which will be discussed in this article.
Characteristics
of Laguerre Indicator
- Platform: Metatrader4
- Currency pairs: Any
currency pairs
- Trading Time: Depends on
your strategy
- Timeframe: Any (recommended
H4 and higher)
Laguerre
Indicator became widely known in the beginning of - 2000s, when John Ehlers
told an interesting algorithm of smoothing prices in his book "Cybernetic
analysis of the stock and futures markets". Ehlers an engineer and in the
70s of the last century, he worked on the creation of equipment for processing
of aerospace signals. It is these achievements were the basis for the creation
Laguerre Indicator.
John Ehlers
is a proponent of the theory of cycles and for developing of the Laguerre
Indicator used the spectral analysis of maximum entropy, developed by
geophysicists. In short, the formula used to calculate the indicator Ehlers are
reduced to the estimation of future spectrums on the basis of a minimum set of
data. According to another theory, the appearance of the indicator associated
with the equation of the famous French mathematician Laguerre. Anyway, let's
check it out in action.
Laguerre
Indicator is an excellent indicator for use in trade with the trend. Traders
like it because it shows the market cycles in the selected period of graph
better than most standard indicators of a set of MT4 platform. This indicator
shows a great start and end micro trends, which means that the indicator will
be primarily interesting for scalpers. Of course, the indicator itself is not
on your nelly can not be an independent trading system! But in combination with
other indicators and methods of technical analysis Laguerre Indicator able to
give a good result.
Settings
of Laguerre Indicator
gamma (default = 0.7) - the
coefficient for calculating the level of the indicator. The higher the ‘gamma’,
the smoother the line will be at the output.
CountBars (default = 950) - the maximum
number of bar of graph on which the indicator will be calculated.
Using the
Laguerre Indicator in trade
Despite the
fact that the Laguerre Indicator is considered trend indicator, it was built on
the principle of the oscillator, where total values are within certain limits.
In our case it is the interval from 0 to 1.
The
simplest option of using:
Long
Trade when
crossing of line 0.2 from the bottom up.
Shot
Trade when
crossing of line 0.8 from the top down.
You can also
use the line of the smoothed indicator 0.5 for filtering of transactions in the
system: if the Laguerre below 0.5, consider only the Long entry; if above -
only a Short entry.
Exit of
Long position if
the Laguerre Indicator crossed the line 0.5 or 0.8 from the top down.
Exit of
Short position when
crossing of line 0.2 or 0.5 from the bottom up.
Let us
consider a simple example of the practical use of the Laguerre Indicator in
trading strategies in the Forex market. John Ehlers noted that the cycles of
the financial markets must be used in combination with trend methodologies, so
for example, I'll take two moving averages. You can experiment with the trend
lines, channels and other trend indicators.
We use two
moving averages, and we will open a position at their intersection. Filters for
opening positions will serve two indicators Laguerre: one with gamma = 0.5
(Blue), and the second 0.9 (Orchid). If the fastest MA (Blue) crosses the slow
MA (Orchid) from the bottom up, fast Laguerre (Blue) is higher than 0.9, and a
slow (Orchid) started to grow and has crossed below the level of 0.1, to open
Long position. Exit of Long positions can be carried out at the crossing of
slow Laguerre Indicator of level 0.9 from top to bottom:
For Short
positions opposite:
Such a
strategy in tandem with trailing stop can work quite well on the period H4.
Laguerre
Indicator is a trend indicator, which displays a trend line in a separate
window. It can be used as a confirmation signal to enter the market, as well as
a separate trading system. This indicator is very simple to use. It can equally
well be used for exit of market, and as a signal to enter.
The author
was not able to completely eliminate the biggest problem of all indicators -
the problem of delay. Nevertheless, Laguerre Indicator produces signals more
and accurately of most standard oscillators, the number of false alarms is
markedly lower than that of the same stochastic.
Laguerre .rar
