Ergodic Even Bought The Article

[Lorenzo91]

Hi Everyone: my problem is this I downloaded the sweet ergodic indicator 2 with the better colors and all. However I have read everything posted on the internet and cannot find out how to interpret it. I know someone is going to say buy the guys books but I actually did buy the 5.95 article that was published by Futures and Commodities magazine. It is an awesome PDF about 15 pages. Looks to me like the area of the book concerning this indicator.

http://store.traders.com/-v10-c05-trading-pdf.html

But I still cannot figure out how to read the indicator as the presentation on everyone else's is a little different.

Like what do the Magenta dots mean when it is fading?
How do I interpret the green or red histogram?
And the red and green line?
Or the yellow signal line?

I am using the 3, 5, false, 14 settings and I know some people use 49/147/29

Any insight into how you guys see this indicator would be great. I know it is kind of an obscure indicator and this is the reason I like it so much. Plus I really like the visual aspect of it. If anyone wants me to email the the PDF let me know. Thnk you so much.

[NinjaTrader_Bertrand]

Hi Lorenzo91, there is unfortunately no clearcut answer on that topic, as there are always many ways to use new tools in exitsting strategies. Ideas come to mind are Zero crossing, regular / reverse divergences, crossover and of course momentum direction if used on longer settings. You can try going to the source of this indicator, Bill Blau's book 'Momentum, Direction and Divergence'.

[ThatManFromTexas]

Trading Ergodics with the Trend - Rules

1. Enter or hold position only when slope of ECO2 Signal line has the same direction as the trend. (If the histogram is Green (above Zero) enter and hold long position only if the ECO2 Signal line is going up. Conversely,If the histogram is Red (below Zero) enter and hold short position only if the ECO2 Signal line is going down.)

2. Stand aside when slope of ECO2 Signal Line is in the opposite direction of trend.(If the histogram is Green (above Zero) stand aside if the ECO2 Signal line is going down. If the histogram is Red (below Zero) stand aside if the ECO2 Signal line is going up.)

3. Enter or exit position when ECO2 and its Signal Line cross. (If you are long and the ECO2 crosses under the Signal line, exit. If you are short and the ECO2 crosses above the Signal line, exit. )

4. Take note when the ECO2 is 'inside' it's signal line. This indicates failing momentum signified by the magenta dot . (UP Momentum= Green histogram and ECO2 > Signal line . DN Momentum= Red Histogram and ECO2< Signal Line. Else failing momentum, do not trade.)

Just so you know:

1. I don't trade with the Ergodic.

2. I interpreted the rules to the best of my understanding from reading the source code.

3. The MACD indicator set to 2,14,5 will give almost the same plots as the Ergodic with the exception of the magenta dots.

4. I don't trade with the MACD either.