John Ehlers’ Adaptive Stochastic with Cycle-Length Estimation

Summary

This indicator adapts a stochastic oscillator’s lookback window to an estimated market cycle. It first smooths the midpoint of each bar’s high and low, then derives in-phase and quadrature components using a digital filter. A homodyne discriminator estimates cycle period from those components; the estimate is constrained to change gradually and kept between six and fifty bars before further smoothing.

The resulting smoothed period sets a rolling high-low range over half a cycle. The close is normalized within that range to produce the adaptive stochastic value. The document attributes the method to John Ehlers’ book and says a screenshot compares it with George Lane’s stochastic, but provides no numerical test results or trading rules. The output is an indicator rather than a complete strategy: it does not specify entry, exit, or risk controls. Its behavior depends on the input price series and the cycle-estimation and smoothing choices, so the stated comparison alone does not establish predictive value.

Key ideas

• The indicator estimates a changing cycle length from filtered price components.
• Its cycle estimate is bounded between six and fifty bars and smoothed over time.
• The oscillator normalizes the close within a high-low range covering half the estimated period.
• The document presents a visual comparison but no quantified performance test or trading rules.

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