Autocorrelation Dominant Cycles for Fun and Profit"Autocorrelation Periodogram is a technical indicator proposed by John F. Ehlers; it attempts to reveal dominant cycles in market data and measure their amplitude. This study continues Mr. Ehlers’s market cycle research and is preceded by several other indicators, e.g., Ehlers Stochastic and Ehlers Super Smoother Filter.
As the first step, the Autocorrelation Periodogram takes Autocorrelation of price data filtered by Ehlers Roofing Filter. The Autocorrelation function compares the data with itself a certain period back; its value of +1 would signify the perfect correlation and -1, the perfect anti-correlation. Values produced by Autocorrelation are then subjected to Fourier transform."
Below, you see the Autocorrelation Periodogram for BTC daily. See past cycle measures as examples of predicted turning points. I don't use this in trading. I use this for a macro view of how the market is doing. BTC has dumped into rapid cycle mode, the lowest cycle oscillation allowed that is useful. What does this mean you as the trader? You can use this cycle value of 8-9 right now as the length for standard indicators such as RSI and Stoch RSI. The problem here with this number is that the correlation is low. as denoted with the explosion orange, so the likelihood that the cycle is actually 8-9 right now is not as high as I would like it; however, lets have some fun and see if the cycle plays out as a predictive measure of the next move, up or down.
