[blackcat] L2 Ehlers Center of Gravity
Level: 2
Background
John F. Ehlers introuced center of gravity (CG) in his "Cybernetic Analysis for Stocks and Futures" chapter 5 on 2004.
Function
The center of gravity (CG) of a physical object is its balance point. For example, if you balance a 12-inch ruler on your finger, the CG will be at its 6-inch point. If you change the weight distribution of the ruler by putting a paper clip on one end, then the balance point (i.e., the CG) shifts toward
the paper clip. Moving from the physical world to the trading world, we can substitute the prices over our window of observation for the units of weight along the ruler. Using this analogy, we see that the CG of the window moves to the right when prices increase sharply. Correspondingly, the CG of the window moves to the left when prices decrease.
The idea of computing the center of gravity of Dr. Ehlers arose from observing how the lags of various finite impulse response (FIR) filters vary according to
the relative amplitude of the filter coefficients. A simple moving average (SMA) is an FIR filter where all the filter coefficients have the same value (usually unity). As a result, the CG of the SMA is exactly in the center of the filter. A weighted moving average (WMA) is an FIR filter where the most recent price is weighted by the length of the filter, the next most recent price is weighted by the length of the filter less 1, and so on. The weighting terms are the filter coefficients. The filter coefficients of a WMA describe the outline of a triangle. It is well known that the CG of a triangle is located at one-third the length of the base of the triangle. In other words, the CG of the WMA has shifted to the right relative to the CG of an SMA of equal length, resulting in less lag. In all FIR filters, the sum of the product of the coefficients and prices must be divided by the sum of the coefficients so that the scale of the original prices is retained.
Key Signal
CG ---> CG fast line
CG (2) ---> CG slow line
Pros and Cons
100% John F. Ehlers definition translation of original work, even variable names are the same. This help readers who would like to use pine to read his book. If you had read his works, then you will be quite familiar with my code style.
Remarks
The 26th script for Blackcat1402 John F. Ehlers Week publication.
Readme
In real life, I am a prolific inventor. I have successfully applied for more than 60 international and regional patents in the past 12 years. But in the past two years or so, I have tried to transfer my creativity to the development of trading strategies. Tradingview is the ideal platform for me. I am selecting and contributing some of the hundreds of scripts to publish in Tradingview community. Welcome everyone to interact with me to discuss these interesting pine scripts.
The scripts posted are categorized into 5 levels according to my efforts or manhours put into these works.
Level 1 : interesting script snippets or distinctive improvement from classic indicators or strategy. Level 1 scripts can usually appear in more complex indicators as a function module or element.
Level 2 : composite indicator/strategy. By selecting or combining several independent or dependent functions or sub indicators in proper way, the composite script exhibits a resonance phenomenon which can filter out noise or fake trading signal to enhance trading confidence level.
Level 3 : comprehensive indicator/strategy. They are simple trading systems based on my strategies. They are commonly containing several or all of entry signal, close signal, stop loss, take profit, re-entry, risk management, and position sizing techniques. Even some interesting fundamental and mass psychological aspects are incorporated.
Level 4 : script snippets or functions that do not disclose source code. Interesting element that can reveal market laws and work as raw material for indicators and strategies. If you find Level 1~2 scripts are helpful, Level 4 is a private version that took me far more efforts to develop.
Level 5 : indicator/strategy that do not disclose source code. private version of Level 3 script with my accumulated script processing skills or a large number of custom functions. I had a private function library built in past two years. Level 5 scripts use many of them to achieve private trading strategy.
Background
John F. Ehlers introuced center of gravity (CG) in his "Cybernetic Analysis for Stocks and Futures" chapter 5 on 2004.
Function
The center of gravity (CG) of a physical object is its balance point. For example, if you balance a 12-inch ruler on your finger, the CG will be at its 6-inch point. If you change the weight distribution of the ruler by putting a paper clip on one end, then the balance point (i.e., the CG) shifts toward
the paper clip. Moving from the physical world to the trading world, we can substitute the prices over our window of observation for the units of weight along the ruler. Using this analogy, we see that the CG of the window moves to the right when prices increase sharply. Correspondingly, the CG of the window moves to the left when prices decrease.
The idea of computing the center of gravity of Dr. Ehlers arose from observing how the lags of various finite impulse response (FIR) filters vary according to
the relative amplitude of the filter coefficients. A simple moving average (SMA) is an FIR filter where all the filter coefficients have the same value (usually unity). As a result, the CG of the SMA is exactly in the center of the filter. A weighted moving average (WMA) is an FIR filter where the most recent price is weighted by the length of the filter, the next most recent price is weighted by the length of the filter less 1, and so on. The weighting terms are the filter coefficients. The filter coefficients of a WMA describe the outline of a triangle. It is well known that the CG of a triangle is located at one-third the length of the base of the triangle. In other words, the CG of the WMA has shifted to the right relative to the CG of an SMA of equal length, resulting in less lag. In all FIR filters, the sum of the product of the coefficients and prices must be divided by the sum of the coefficients so that the scale of the original prices is retained.
Key Signal
CG ---> CG fast line
CG (2) ---> CG slow line
Pros and Cons
100% John F. Ehlers definition translation of original work, even variable names are the same. This help readers who would like to use pine to read his book. If you had read his works, then you will be quite familiar with my code style.
Remarks
The 26th script for Blackcat1402 John F. Ehlers Week publication.
Readme
In real life, I am a prolific inventor. I have successfully applied for more than 60 international and regional patents in the past 12 years. But in the past two years or so, I have tried to transfer my creativity to the development of trading strategies. Tradingview is the ideal platform for me. I am selecting and contributing some of the hundreds of scripts to publish in Tradingview community. Welcome everyone to interact with me to discuss these interesting pine scripts.
The scripts posted are categorized into 5 levels according to my efforts or manhours put into these works.
Level 1 : interesting script snippets or distinctive improvement from classic indicators or strategy. Level 1 scripts can usually appear in more complex indicators as a function module or element.
Level 2 : composite indicator/strategy. By selecting or combining several independent or dependent functions or sub indicators in proper way, the composite script exhibits a resonance phenomenon which can filter out noise or fake trading signal to enhance trading confidence level.
Level 3 : comprehensive indicator/strategy. They are simple trading systems based on my strategies. They are commonly containing several or all of entry signal, close signal, stop loss, take profit, re-entry, risk management, and position sizing techniques. Even some interesting fundamental and mass psychological aspects are incorporated.
Level 4 : script snippets or functions that do not disclose source code. Interesting element that can reveal market laws and work as raw material for indicators and strategies. If you find Level 1~2 scripts are helpful, Level 4 is a private version that took me far more efforts to develop.
Level 5 : indicator/strategy that do not disclose source code. private version of Level 3 script with my accumulated script processing skills or a large number of custom functions. I had a private function library built in past two years. Level 5 scripts use many of them to achieve private trading strategy.
Avoid losing contact！Don't miss out! The first and most important thing to do is to join my Discord chat now! Click here to start your adventure: discord.com/invite/ZTGpQJq 防止失联，请立即行动，加入本猫聊天群: discord.com/invite/ZTGpQJq