Investing & Trading

Elegant Oscillator Strategy

By Samantha Baltodano


TL;DR:

The Elegant Oscillator is a technical indicator used by traders to identify buy and sell signals in the stock market. 


It calculates the inverse Fisher transform of price and applies the Super Smoother filter to it. The resulting line oscillates between the values of -1.0 and +1.0, with threshold values of -0.5 and +0.5 used to identify potential buy and sell signals. 


Traders can also use the Elegant Oscillator alongside other trading strategies to generate more accurate signals.


You can access this indicator here.


What Is The Elegant Oscillator Strategy?

When it comes to trading, technical indicators play a crucial role in identifying market trends and generating buy and sell signals. The Elegant Oscillator is one of these technical indicators that’s widely used by traders to make informed decisions.


It does this by using signal processing techniques to calculate the inverse Fisher transform of price, which is then filtered using the Super Smoother filter. 


  • Signal processing techniques are a set of methods that are used to analyze and manipulate signals, which can be any kind of data that varies over time, like stock prices, sound waves, or electrical signals. These techniques involve applying math operations to the signals in order to extract useful information or remove unwanted noise from the data.


The resulting line oscillates between the values of -1.0 and +1.0, and traders can use the lower and upper threshold values of -0.5 and +0.5 to identify potential buy and sell signals. 


The Elegant Oscillator is a powerful tool that can help traders make informed decisions about when to enter or exit a trade.


Formula and Calculation

The Elegant Oscillator is calculated using the following formula:


  • EOM = inverse Fisher transform of ((2*Price - High - Low) / (High - Low))


  • ESMMA = Super Smoother filter of EOM


The inverse Fisher transform is a mathematical technique that takes the price data of a stock and transforms it into a new set of data that has a more normal distribution. This makes it easier for traders to analyze and interpret the data. 


The Super Smoother filter is then applied to this new set of data to remove any irregularities or "noise" that may be present. Essentially, this process helps to make the data clearer and more reliable for traders to use in their decision-making.


Trade Signals Using the Elegant Oscillator

To use the Elegant Oscillator, traders need to plot the indicator on their trading platform. The indicator's main plot oscillates between -1.0 and +1.0, with the threshold values set at -0.5 and +0.5. Traders can use these threshold values to identify potential buy and sell signals.


  • When the main plot falls below the lower threshold and forms a valley, it generates a buy signal. 
  • Conversely, when the main plot rises above the upper threshold and forms a peak, it generates a sell signal.


Traders can also use the Elegant Oscillator alongside other trading strategies to generate more accurate signals. For instance, traders can use moving averages to confirm the trend identified by the Elegant Oscillator.


Test The Elegant Oscillator Strategy

Great news! 


You can back test this exact strategy on historical data for any of your favorite symbols using TradingView. 


This strategy has already been built and all you have to do is log in and take it for a spin. You can access this indicator here.


If you’re new to back testing and to TradingView, don’t worry. I created a step-by-step guide you can follow to begin testing the Elegant Oscillator Strategy.


Summary

  • The Elegant Oscillator is a widely used technical indicator that helps traders make informed decisions about when to enter or exit a trade.
  • The indicator calculates the inverse Fisher transform of price and applies the Super Smoother filter to remove any unwanted noise from the data.
  • Signal processing techniques are used to analyze and manipulate signals, which can be any kind of data that varies over time, like stock prices, sound waves, or electrical signals.
  • The indicator's main plot oscillates between -1.0 and +1.0, and traders can use the lower and upper threshold values of -0.5 and +0.5 to identify potential buy and sell signals.
  • When the main plot falls below the lower threshold and forms a valley, it generates a buy signal, and when it rises above the upper threshold and forms a peak, it generates a sell signal.


Elegant Oscillator is just one of many strategies that Archaide automates. For a full list of strategies and studies available click here.


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