TASC 2025.09 The Continuation Index

█ OVERVIEW

This script implements the "Continuation Index" as described by John F. Ehlers in the September 2025 edition of TASC's Trader's Tips. The Continuation Index uses Laguerre filters (featured in the July 2025 edition) to provide an early indication of trend direction, continuation, and exhaustion.


█ CONCEPTS

The idea for the Continuation Index was formed from an observation about Laguerre filters. In his article, Ehlers notes that when price is in trend, it tends to stay to one side of the filter. When considering smoothing, the UltimateSmoother was an obvious choice to reduce lag. With that in mind, The Continuation Index normalizes the difference between UltimateSmoother and the Laguerre filter to produce a two-state oscillator.

To minimize lag, the UltimateSmoother length in this indicator is fixed to half the length of the Laguerre filter.


█ USAGE

The Continuation Index consists of two primary states.

• +1 suggests that the trader should position on the long side.
  
• -1 suggests that the user should position on the short side.
  

Other readings can imply other opportunities, such as:

• High Value Fluctuation could be used as a "buy the dip" opportunity.
  
• Low Value Fluctuation could be used as a "sell the pop" opportunity.
  

█ INPUTS

By understanding the inputs and adjusting them as needed, each trader can benefit more from this indicator:

Gamma: Controls the Laguerre filter's response. This can be set anywhere between 0 and 1. If set to 0, the filter’s value will be the same as the UltimateSmoother.

Order: Controls the lag of the Laguerre filter, which is important when considering the timing of the system for spotting reversals. This can be set from 1 to 10, with lower values typically producing faster timing.

Length: Affects the smoothing of the display. Ehlers recommends starting with this value set to the intended amount of time you plan to hold a position. Consider your chart timeframe when setting this input. For example, on a daily chart, if you intend to hold a position for one month, set a value of 20.