Decycler Oscillator

The Decycler Oscillator, invented by John F. Ehler, is a technical indicator whose computation comprises removing extremely low-frequency components from Ehlers Simple Decycler and translating the output into the oscillator. The half-period Ehlers High pass filter is used to remove low-frequency components.

The oscillator is defined as the high-pass output data to price ratio multiplied by a coefficient. This coefficient is set to 1 by default, but you may want to change it if you utilize many instances of the oscillator on the same subgraph. Crossovers of oscillators with differing coefficients may aid in detecting significant trend reversals.

What is the Decycler Oscillator?

The Decycler Oscillator is a trend reversal indicator, an oscillator that detects trend reversals via digital signal processing methods. The input data is subjected to a high-pass filter, and the high-frequency components are eliminated using term cancellation. Lower-frequency components are filtered out of the output so that they do not cancel out the original data. The period of the rapid line is 100 and the K value is 1.2, whereas the period of the slow line is 125 and the K value is 1.

This indication displays the Decycler Oscillator’s fast responsiveness to market movement. It employs the concept of a Decycler Oscillator pair with various characteristics.

Setting up the Decycler Oscillator
Setting up the Decycler Oscillator

Decycler Oscillator Strategy

To assist remove low frequency values, the Decycler Oscillator Strategy employs John Ehlers’ high pass filter and decycler functions. To assist pinpoint trend and reversal points, the Oscillator employs a rapid and low curve. The Decycler Oscillator makes use of both and eliminates low frequency values. The Decycler Oscillator is multiplied by a coefficient that is usually one. The indicator allows for the creation of two curves: rapid and slow. This is done in order to potentially discover reversal points. To obtain better reversal points matched to the time period being used, the user should change the coefficient.

These two methods could be used for identifying trend: strict mode and simple mode. Only when a crossing occurs and the fast curve passes above or below the slow curve will the strict mode shade. The basic mode merely examines the crossing.

Buy Signal

The following could be your checklist for a buy trade:

  • When the Fast-Decycler moves above the Slow-Decycler.
  • When the price candle closes as a bullish bar.

Once these two events occur:

  • You could open a buy position after the bullish crossover happens and you get your signal confirmation.
  • You could set your stop loss just below the nearest swing low.
  • You could set your take profit at the nearest resistance zone, or you could exit trade when the indicator plots a bearish crossover.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Decycler Oscillator Buy Setup
Decycler Oscillator Buy Setup

Sell Signal

The following could be your checklist for a sell trade:

  • When the Fast-Decycler moves below the Slow-Decycler.
  • When the price candle closes as a bearish bar.

Once these two events occur:

  • You could open a sell position after the bearish crossover happens and you get your signal confirmation.
  • You could set your stop loss just above the nearest swing high.
  • You could set your take profit at the nearest support zone, or you could exit trade when the indicator plots a bullish crossover.
  • For good risk management, I would only consider trades with a risk to reward ratio of at least 1:2.
Decycler Oscillator Sell Setup
Decycler Oscillator Sell Setup

Decycler Oscillator Pros & Cons

Pros

  • The Decycler Oscillator may be used to trade any currency pair. It is also suitable for short-term and long-term trading across all timeframes.
  • This Indicator also functions well with other technical indicators to aid confluence.
  • This indicator helps show the current trend of the asset being traded.

Cons

  • The Decycler Oscillator may produce false signals sometimes.
  • The trader would need to time entry and confirm signals with additional analysis.

Conclusion

The Decycler Oscillator is a technical indicator that can help traders identify trend reversals. It is a user-friendly indicator which provides signals via crossovers; however it is susceptible to false signals. Therefore, this indicator should not be used as a stand-alone trade signal, but rather in conjunction with price action and other technical indicators.

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