# [blackcat] L2 Ehlers Signal to Noise Indicator

Level: 2

Background

John F. Ehlers introuced Signal to Noise Indicator in his "Rocket Science for Traders" chapter 8. Dr . Ehlers terms the case where half the average daily trading range is equal to the signal amplitude as our zero decibel Signal-to-Noise Ratio (0 dB SNR ) condition. He wants the signal amplitude to be at least twice the noise amplitude (6dB SNR ) so that there exists a reasonable chance to make a profit from the chart analysis.

Function

blackcat L2 Ehlers Signal to Noise Indicator is used to measure Signal-to-Noise Ratio ( SNR ). The SNR in decibels is calculated in a single line of code near the end. The signal power is divided by the noise power to get a power ratio. The logarithm of the power ratio. At 0 dB , the peak-to-peak noise signal is twice the amplitude of the signal. Therefore, when we compute the 0 dB case, the ratio is calculated to be 10*log(1/2)^2 = -6 dB . We must then add 6 dB back into the computation to remove this bias, establishing the definition of 0 dB SNR .

Key Signal

Smooth --> 4 bar WMA w/ 1 bar lag
Detrender --> The amplitude response of a minimum-length HT can be improved by adjusting the filter coefficients by
trial and error. HT does not allow DC component at zero frequency for transformation. So, Detrender is used to remove DC component/ trend component.
Q1 --> Quadrature phase signal
I1 --> In-phase signal
Period --> Dominant Cycle in bars
SNR --> Signal-to-Noise Ratio

Pros and Cons

100% John F. Ehlers definition translation of original work, even variable names are the same. This help readers who would like to use pine to read his book. If you had read his works, then you will be quite familiar with my code style.

Remarks

The 5th script for Blackcat1402 John F. Ehlers Week publication.

In real life, I am a prolific inventor. I have successfully applied for more than 60 international and regional patents in the past 12 years. But in the past two years or so, I have tried to transfer my creativity to the development of trading strategies. Tradingview is the ideal platform for me. I am selecting and contributing some of the hundreds of scripts to publish in Tradingview community. Welcome everyone to interact with me to discuss these interesting pine scripts.

The scripts posted are categorized into 5 levels according to my efforts or manhours put into these works.

Level 1 : interesting script snippets or distinctive improvement from classic indicators or strategy. Level 1 scripts can usually appear in more complex indicators as a function module or element.

Level 2 : composite indicator/strategy. By selecting or combining several independent or dependent functions or sub indicators in proper way, the composite script exhibits a resonance phenomenon which can filter out noise or fake trading signal to enhance trading confidence level.

Level 3 : comprehensive indicator/strategy. They are simple trading systems based on my strategies. They are commonly containing several or all of entry signal, close signal, stop loss, take profit, re-entry, risk management, and position sizing techniques. Even some interesting fundamental and mass psychological aspects are incorporated.

Level 4 : script snippets or functions that do not disclose source code. Interesting element that can reveal market laws and work as raw material for indicators and strategies. If you find Level 1~2 scripts are helpful, Level 4 is a private version that took me far more efforts to develop.

Level 5 : indicator/strategy that do not disclose source code. private version of Level 3 script with my accumulated script processing skills or a large number of custom functions. I had a private function library built in past two years. Level 5 scripts use many of them to achieve private trading strategy.

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Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

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