Cybernetic Analysis for Stocks and Futures: Cutting-Edge DSP Technology to Improve Your Trading 

This is a book clear and very easy to read, for me as physics research, and to my development is very useful.

Strongly recommended.

John Ehlers newest title is sure to make even the brightest of brain surgeons quiver for fear of closing the renal artery prior to completing the operation. Other reviewers may diss this author but his latest book truly reaches for the stars and makes it. The chapters while short, are to the point and exquisitely illustrate the concept being taught. If you are new to trading systems the shortness of the explanations may be too short but for experienced traders and developers of trading systems they are long enough.

Aspects of many indicators are reviewed with fresh insight added for several new systems not talked about in print before. Removing the lag is the traders dream. Many of the indicators shown do work although errata in the code does spoil some of the implementations given. Ehlers has provided for the keener updates on his website that corrects the mistakes, kudos here for doing the right thing.

Overall Ehlers has done it again and this book should be a staple in any traders library. As for the wannabees wanting all the answers and sure fire methods, choose brain surgery as your career option. No one said trading would be easy but Ehlers has given more toolsets that a successful trader can use in a concise to the point book.

As an aspiring quant, this is my all-time favorite book on the subject.
The day I discovered his algorithms and principles on applying DSP to the financial markets, I felt like a door I never knew existed opened, and my universe just expended 10 fold.
I have used and derived his algorithms for more than 5 years now, using them in my research, and in my trading, with great results.

The book is pricey, but worth every penny.

Buy without hesitation, and your mind will be blown.

If I had the choice of picking just one book on TA, it would be this one!

The new technical indicators developed in this book are far superior to the traditional indicators like Exponential and Simple Moving Averages, RSI, Stochastics etc.

I don’t have TradeStation, but the source-code for the indicators are well explained, so I translated TradeStation code to my Java based system in no time.

Basically the book deals with the marked using fairly advanced math for splitting the data in a trend-mode and cycle-mode. Traditional methods of smoothing the data using Simple/Exponential Moving averages are not bad, but they filter the data relatively poorly, so that there is a “leak” of higher frequencies into the result, giving the familiar whip-saws. To reduce the whip-saws, one is stuck with sometimes an unacceptable lag. For comparison, one of the technical indicators in the book, the Instantaneous Trendline, by applying more advanced mathematical filtering, cuts down on the whip-saws, but has virtually no lag!

This is just one example of the many new (revolutionary, I would say) ways of looking at marked data.

Of the oscillators I have implemented so far the Stochastic CyberCycle, but this togheter with the Instantaneous Trendline are themselves so good that I have dumped my usual EMAs, MACDs,

etc from my charts.

I’m really looking forward to the sequel of the book (if there will be one).

John Ehlers has again written a book that I believe is detined to become an “investment classic”.
I have three things I look for in investment books and newsletters:
1) Original Research
2) Explained Methodology
3) Actionable Strategy
Many books deemed “classics” fail to meet one or more of these criteria. Very few meet all three. John Ehlers is rare in achieving all three with his works.
1) Original Research – Original research is key to being successful in the market. A technique that everyone knows is unlikely to work very well for trading or investing. Ehlers is a pioneer in applying advanced cycle measurement theory (MESA – Maximum Entropy Spectral Theory) to the stock market. In Cybernetics he extends and builds on his cycle work by also applying very advanced and sophisticated Digital Signal Processing (DSP) techniques to trading the market. More information on Ehlers MESA work can be found at […] To my knowledge there is no one else using and reporting on the application of DSP to the market.
2) Explained Methodology – In my opinion this is where Ehlers really shines. While these DSP techniques are extremely sophisticated and mathematically intense, Ehlers cuts to the chase in a very concise fashion, explaining the core principles, presenting the math, but leaving the derivations and complication to the textbooks and the engineers. Ehlers makes the techniques acceessible to the trader/investor without trying to turn the reader into an Electrical Engineer.
3) Actionable Strategy – all the tools presented in the book are fully disclosed and accompanied by complete TradeStation Easy Language Code and eSignal Formula Script (EFS). In addition the code can be purchased from […] for a modest cost, to save yourself the typing and debugging time (your time is worth something). I use TradeStation. With the fully disclosed code, all of the indicators can be displayed, modified (if desired), combined with one another or other indicators, and your own systems created. Those systems can then be back-tested in TradeStation to see how they performed. They can also be optimized and otherwise worked with to create systems that work for you.
Ehlers has created a “cookbook” of indicators that use some of the most advanced concepts ever applied to the market.
Ehlers states: “… (the) historical performance of these systems is on a par with or exceeds, the performance of systems that would cost you thousands of dollars to purchase”. Analysis with TradeStation confirms this.

I bought this book with the expectation to read some well documented mathematical work able to understand as a Mathematician with a Master’s Degree in Financial Engineering. The presentation is unbelievable ridiculous. The book is pretty much filled with the lengthy code of the indicators for eSignal. The author has no respect for the reader. Instead of presenting what he has to say, if any, he just wrote a book to steal the customer from his money. Probably much needed as his personal trading systems may fail desperately. Plus the author asks $90 for a CD containing the code!
My experience is that a Slow Stochastics (14,3,3) is all you need along with a couple moving averages.
My biggest disappointment from reading trading books is that 99% of them are snake oil salesmanship. This book is one of them. It is just a pamphlet.

Just a great book that every technical trader should have on their desk. The code examples all work. Ehlers clearly explains the purpose of the math behind each indicator and when you code it up and see it work, you’ll be very happy with yourself. The markets are camouflaged by noise- and Ehlers is an expert at noise reduction signal processing. Get the book and put some of the indicators on your trading platform, you’ll be surprised how much clearer the signals will be.

This is the most beneficial book I have read. The idea of Fisher Transform, Inverse Fisher Transform, and others in the book are genuine and novel ideas. After reading this book I spent a very long time experimenting with all the different ideas in it, with many variations. I designed many successful systems, but one system in particular had excellent results. It was only in a certain time frame, not all. Since then, this has been my main system for intraday trading. I have not been able to find another system that even comes close to this one.

John Ehlers is one of the most innovative trading systems engineers known to the public. This book contains a set of completely novel indicators and elegantly simple trading systems based on those indicators. The author specializes in applying his deep knowledge of signal analysis in the form of digital signal processing (DSP) to stock and futures market data. This book is thought provoking. Few trading or investment books contain truly new ideas for us traders to sink our teeth into. This is an exception.

For example, chapter one dives right into an analysis of why the Gaussian distribution (the normal probability curve) is inappropriate for market analysis, despite the fact that it is widely used, for example as the basis for both the Commodity Channel Index indicator and Bollinger Bands indicator. Ehlers uses a unique example of beads on strings to visually illustrate that typical market prices spend most of their time near the extremes rather than near the mean. He introduces a mathematical procedure (the Fisher Transform) and applies it to US Treasury Bond futures to graphically and convincingly demonstrate the point. This is just one of many eye-openers in this book.

Ehlers writes in a very clear and direct style. The organization of his material follows a logical progression. The book is rich with meaningful charts and graphics, lean tables of test results, key mathematical formulas and computer code.

Mathematical formulas are limited to the necessary but are complete enough for those with an knowledge of basic algebra to understand and, if desired, derive on their own from the material presented in the book. There are some terms and concepts used that require more advanced knowledge if you are going to really understand the material in detail, such as Z-Transform Notation, decibels, logarithms, and multipole filters. There is no explanation of these tools in the book leaving the reader to research them on his or her own if not familiar. The failure to include an appendix or detailed footnotes explaining these tools (rather than the very few footnoted references to other texts) reduces its value somewhat to those in the trading community who are not electrical engineers yet hungry for information on the subject of cycle analysis.

Most valuable is Ehler’s ability to convey rather complex ideas in simple language that allows the reader to concentrate on why an particular indicator may work, how it works, what information it is supposed to provide, how it may compare to other similar indicators, what are its unique benefits, and how to incorporate it into a trading system. Some reviewers on these pages complain that the book is too short. In my view that is high praise, considering the amount of information contained.

Cycle analysis is the orphan of the technical trading world. There is little in the literature, save perhaps Elliott Wave, to help us understand how to address the cyclical nature of markets. This book helps fill that gap with solidly documented research and specific tools to analyze cycles. It will be most useful to those who favor mechanical trading systems and are comfortable with trading systems programming in general.

The inclusion of TradeStation EasyLanguage(c) code is helpful as it is very similar to the widely-used Basic programming language and therefore readily understood by many. On the other hand, EFS (eSignal Formula Script) is a verbose specialty script language few will be able to decipher, and its inclusion within chapters seriously interrupts the flow of the book. Overall, the bulky EFS code and lack of a technical appendix are minor complaints. This is an excellent book for technical and mechanical traders.

As to a star rating, I deduct one star for the many pages of EFS code in each chapter and the omission of a technical appendix explaining advanced terms. I rate this book 4 stars.

PS. Anyone who has read the Tom Swift books, as did I as a boy, will enjoy Ehler’s tongue-in-cheek humor at the start of each chapter.