Ehlers Decycler Filters for Trend Extraction and Cycle Rejection

Summary

The Ehlers Decycler estimates trend by filtering cyclical movement from price. The document distinguishes the first-order Simple Decycler from the second-order version: the first responds more quickly but leaves more cycle noise, while the second rejects cycles more sharply at the cost of additional lag. Both are presented as configurable alternatives using a cutoff period, with the second-order filter’s cutoff adjusted to align its response with that period.

Optional percentage bands form a channel around the trend estimate. The text suggests using the line’s slope as a directional filter, substituting it for a moving-average baseline, or treating band breaks as possible signs of an impulsive move. These are proposed applications, not performance-tested trading rules. The document gives filter equations and implementation settings but no market tests or evidence that the suggested signals are profitable. Results depend on the selected period, asset, and timeframe, and the bands are fixed percentages rather than measures of changing volatility.

Key ideas

• The one-pole Decycler offers a faster trend estimate but lets more cyclical noise through.
• The two-pole version rejects cycles more sharply and tends to produce a smoother, slower line.
• The cutoff period controls which cycle lengths the filter attenuates.
• Optional percentage bands create a channel around the filtered trend and may help identify moves beyond it.
• The suggested trading uses are hypotheses; the document provides no performance tests.

Tags

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