Using Laguerre Oscillator Percentile Ranks to Flag Market Extremes

Summary

This indicator uses two Laguerre-smoothed versions of the average of each bar’s high and low, with different smoothing parameters, to form a percentage price oscillator. It ranks the oscillator readings against a rolling lookback window and highlights extreme readings as possible market tops or bottoms. The described defaults use a 200-bar lookback, a 90th-percentile extreme threshold, and a 70th-percentile warning threshold; the author says it is suited to daily charts.

The plotted top and bottom series use separate oscillator directions, with color changes when their percentile thresholds are crossed. The intermediate thresholds are presented as warnings, not confirmed reversals. The document supplies indicator logic and parameter suggestions, but no backtest, performance statistics, or evidence that the signals reliably identify turning points. Percentile extremes can persist during strong trends, and the method should be evaluated on the intended market and timeframe before being used as a trading rule.

Key ideas

• The indicator compares short and long Laguerre smoothers of the bar midpoint to create an oscillator.
• It ranks oscillator values over a rolling lookback period to identify unusually high or low readings.
• Extreme percentile thresholds mark potential tops and bottoms, while intermediate thresholds serve as warnings.
• The suggested settings target daily charts, but the document provides no performance test or validation.

Tags

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