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Ehlers Laguerre Relative Strength Index

The Laguerre Relative Strength Index was introduced by John Ehlers in his book "Cybernetic Analysis for Stocks and Futures". It uses a 4-Element Laguerre filter to provide a "time warp" such that the low frequency components are delayed much more than the high frequency components. This enables much smoother filters to be created using shorter amounts of data.

Interpretation

www.cmsfx.comA typical use of the Laguerre RSI is to buy after the line crosses back over the 20% level and sell after the price crosses back down through the 80% level.

Implementation

The Price and Damping Factor inputs have been parameterized to allow the user full customization of this indicator. The only parameter to optimize is a damping gamma factor, usually 0.5 to 0.85, to best suit the trade instrument's data. Please note: This implementation of the Laguerre RSI has been normalized to a scale of 0-100 rather than the original 0-1 scale.

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