Cyber Cycle

What is the Cyber Cycle?

The Cyber Cycle is John Ehlers' filter for extracting the cyclical component of price. Introduced in his 2004 book Cybernetic Analysis for Stocks and Futures, it first smooths price with a short weighted FIR average of the last four bars, then applies a recursive filter that rejects the slow trend component while the smoothing damps bar-to-bar noise. What remains is the mid-frequency swing, the cycle, oscillating around zero, with a trigger line (the cycle delayed one bar) supplying crossover signals near turns.

The appeal is low lag: in sideways markets the crossings tend to land close to actual swing troughs and crests. The cost is that trends overwhelm it, producing repeated failed counter-trend signals. Ehlers also published normalized variants, including a stochastic version that ranks the cycle within its recent range in Stochastic Oscillator fashion so extremes are comparable across time.

How traders use it

• Swing timing in ranging conditions: crossings of the cycle and its one-bar-delayed trigger are taken as entries near cycle troughs and crests, ideally gated by a regime filter that confirms the market is range-bound rather than trending.
• Amplitude and rhythm reads: shrinking cycle amplitude warns that the swing rhythm is dying out, while comparing the oscillation against dominant cycle measurement tools checks whether a tradable cycle exists at all.
• As a building block: the cycle output feeds Ehlers' adaptive and stochastic-normalized versions and other downstream studies rather than always being traded raw.