Correlation Cycle Indicator for Trend Direction and Strength
Summary
The Correlation Cycle indicator, attributed to John Ehlers, compares recent price data with fixed-period cosine and negative-sine waves. These normalized correlations form real and imaginary components, which are used to calculate a phase angle and a market-state reading. The example uses a period of 14 and offers display modes for the cycle indicator, cycle index, phasor angle, and market state. Its practical guidance is to treat green as a buy condition and red as a sell condition, with wider separation between the plotted components interpreted as a stronger trend and close readings as choppier conditions.
The document includes implementation logic and describes color and state calculations, but it provides no test results, sample charts, market or timeframe guidance, or evidence that the suggested color changes are profitable. The period setting and the use of price data influence the calculation, while the stated signal interpretation is simplistic and does not specify risk management. The indicator is best understood here as a trend and cycle visualization, not a validated standalone strategy.
Key ideas
- The indicator correlates price with cosine and negative-sine waves over a selected period.
- Its real and imaginary components determine a phase angle and displayed market state.
- The source describes green and red states as directional trade cues.
- Greater separation is interpreted as stronger trend conditions, while close readings suggest choppiness.
- No performance testing or risk-management rules are provided.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.