Andean Oscillator: Exponential Envelopes for Bull and Bear Trends

Summary

The Andean Oscillator estimates the strength of bullish and bearish price variation using exponential envelopes of regular and squared prices. It maintains upper and lower envelope values, then derives bull and bear components from the difference between each squared-price envelope and the square of its corresponding price envelope. A smoothed line based on the larger component acts as a signal reference.

Interpretation centers on the components’ relative levels and direction: a stronger bull component suggests upward conditions, while a stronger bear component suggests downward conditions. The signal line can be used to filter component crossovers or as another crossing threshold. The document provides the calculation approach and suggested readings but no empirical results, trading rules with tested exits, or evidence that these interpretations predict future returns. The indicator’s usefulness may vary with the selected length, signal smoothing, instrument, and timeframe.

Key ideas

• The indicator derives bullish and bearish components from exponential envelopes of price and squared price.
• The larger bull component is interpreted as evidence of upward trend pressure, while the larger bear component suggests downward pressure.
• A smoothed signal line can help filter component crossovers.
• The length and signal settings control envelope responsiveness and smoothing.
• The document explains construction and interpretation but provides no performance evidence.

Tags

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