John F. Ehlers is probably best known for his MESA (maximum entropy spectral analysis) technical indicators, developed over thirty years ago. He has continued his research in this field and brings traders up to date with his latest book, Cycle Analytics for Traders: Advanced Technical Trading Concepts (Wiley, 2013).

Two types of traders should read this book: those who want to know why things work and those who are looking for new and improved indicators. Since I belong to the former category, I’ll quickly dispense with what probably interests most technical traders—indicators. The book comes with a PIN code to access and copy the EasyLanguage computer code found in the book, some of which is quite lengthy and would be exceedingly tedious to retype. Among the indicators whose code is provided are the decycler, decycler oscillator, band-pass filter, Hurst coefficient, roofing filter, modified (and adaptive) stochastic, modified (and adaptive) RSI, autocorrelation, autocorrelation periodogram, spectral estimate, even better sinewave indicator, convolution, and Hilbert transformer. There is code to compute the dominant cycle using the dual differentiator method, the phase accumulation method, and the homodyne method. There are also indicators for SwamiCharts. (If you don’t know what SwamiCharts are, a quick Google search will fill you in.)

As for the why. Ehlers is careful to explain the principles and the math behind these indicators. But he does more. He reflects on the very nature of the markets themselves. I was particularly struck by his thoughts on the drunkard’s walk hypothesis.

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