ECO - Ergodic Candlestick Oscillator - Metastock Formula

Originally created by William Blau, the Ergodic Candlestick Oscillator "ECO" can be described as a double smoothed ratio, of the difference between the the high(H) and low(L) prices to the  the close(C) and open(O) of each bar, and  for each bar.

Formula (1): (MOV(MOV(C-O,5,E))26,E)/MOV(MOV(H-L,5,E))26,E))*100

Formula (2): ave1:=11; {ms says 25, esignal default is 32,vlad uses 11}


ave2:=4; {ms says 13, esignal default is 12,vlad uses 4}
ave3:=5; {esignal says5}
eco:=(Mov(Mov(C-O,ave1,E),ave2,E)/Mov(Mov(H-L,ave1,E),ave2,E))*100;
signal:=Mov(eco,ave3,E);
eco;
signal


The Ergodic Candlestick Oscillator is often favored over delayed and smoothed indicators like the MACD and stochastic indicator as the Ergodic Candlestick Oscillator is not compressed or smoothed with long term averages.

This lack of compression or saturation like other oscillators prevents you from being delivered a false signal that would typically result in you exiting a trade. As we know long term trends are often presented with the MACD as early signs of a trend change, which can be a false signal due to the way the MACD calculators your signals.




How to use Ergodic Candlestick Oscillator 
If you want to implement Ergodic Oscillator into your trading method the first thing you need to understand is when it tells you to buy and when it tells you to sell. This is really simple, as the Ergodic Oscillator indicator crosses above 0 into the positive BUY, and therefore,  as the Ergodic Oscillator indicator crosses below 0 into the negative SELL.  It is as simple as that.

Unlike other trading indicators the Ergodic Candlestick Oscillator is less known and often not as easy for people to implement when they are developing and implementing their trading strategy, as the signals are not as clean as the MACD for example and there is also not as much information published on the indicator.

When best to use Ergodic Candlestick Oscillator 
In our opinion it should be utilized within a trading strategy that is designed to buy and sell stocks over a several month period. How you implement this into your trading strategy is your decision but we can offer the following recommendation:-

1 - Ergodic Candlestick Oscillator Simple Trading Strategy
Use the Ergodic Oscillator as a single indicator trading strategy, buy when above 0 and sell when below 0.


2 - Ergodic Candlestick Oscillator Mixed Trading Strategy
Use other stock market indicators to determine when to enter a stock trade, and use Ergodic Oscillator to signal a sell condition, this can also be used in conjunction with another indicator where by you need both indicators to signal a sell.


3 - Ergodic Candlestick Oscillator Confirmation Trading Strategy
Use other stock market indicators to determine when to enter and exit a stock trade, and use the Ergodic Oscillator to confirm the stock is in a buy position with the indicator reading above 0.

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