Ehlers Loops for Timing Rotation Between Paired Securities

Summary

This indicator visualizes the relative cycles of two securities to help time a strategy that holds a long position in whichever is stronger. It applies the same high-pass and smoothing filters to both price series, then scales each filtered stream by its root-mean-square value so they can be compared as zero-mean oscillators. The chart plots the reference security on the horizontal axis and the chart security on the vertical axis, connecting recent observations into a rotating loop.

The described interpretation uses loop direction and movement: upward motion while rotating clockwise favors the chart security, while rightward motion during counterclockwise rotation favors the reference. Moves beyond one or two standard deviations are presented as possible reversal areas. The source explains the indicator’s construction and visual heuristics, but gives no performance tests or evidence that the signals predict returns. Filter periods and loop appearance depend on user settings, and the example does not specify execution, short positions, or risk controls.

Key ideas

• The indicator filters both securities with matching high-pass and smoothing stages before comparison.
• Each filtered series is scaled by its RMS to create comparable zero-mean oscillators.
• The Ehlers loop places the reference series on the horizontal axis and the chart series on the vertical axis.
• Clockwise upward movement favors the chart security, while counterclockwise rightward movement favors the reference security.
• Large deviations are suggested as possible reversal areas, but the document provides no empirical validation.

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