Adaptive RSI Using Ehlers’ Dominant Cycle Estimate

Summary

This document describes John Ehlers’ Adaptive Relative Strength Index, an oscillator whose lookback changes with an estimated market cycle. It first smooths the midpoint of each bar, then applies digital filters to derive in-phase and quadrature components. A homodyne discriminator estimates the cycle period, which is constrained and smoothed before setting the RSI calculation window.

The indicator sums positive and negative close-to-close changes over roughly half the smoothed cycle and expresses the positive movement as a share of total movement. The document identifies the source as Ehlers’ 2001 book and says a screenshot compares the adaptive version with Wilder’s RSI. It provides an implementation but no quantitative performance evaluation, trading rules, or market-by-market evidence. The cycle estimate and its bounds are design choices, and the text does not establish that adapting the window improves trading outcomes.

Key ideas

• The indicator estimates a dominant cycle from filtered price data.
• The estimated period is bounded and smoothed to limit abrupt changes.
• Its RSI window is set to about half the smoothed cycle length.
• The output measures positive price movement relative to total positive and negative movement.
• The document gives an implementation and visual comparison, but no performance study.

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.