Using Ehlers’ Center of Gravity Indicator for Reversal Signals

Summary

The document introduces John Ehlers’ Center of Gravity indicator as a finite impulse response filter applied to price, with a configurable calculation period. It presents the indicator as a low-lag tool for spotting potential turning points. The basic signal is a crossover between its main and signal lines, with upward crosses treated as possible buy cues and downward crosses as possible sell cues.

For overbought and oversold interpretation, the description uses recent indicator peaks and troughs rather than fixed thresholds: a higher peak may suggest an overbought condition, while a lower trough may suggest oversold conditions. It also mentions divergence as another signal type but gives no detailed rules for identifying or trading it. The document supplies no charts, test results, market-specific guidance, or risk controls, so the signals are instructional ideas rather than demonstrated evidence of predictive performance.

Key ideas

• The indicator applies a finite impulse response filter to price and uses a configurable period.
• Crosses between the main and signal lines are presented as potential reversal signals.
• Recent peaks and troughs provide relative overbought and oversold references.
• Divergence is mentioned, but its detection rules are not explained.
• No performance evidence or risk-management guidance is provided.

Tags

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