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MESA & Fourier Analysis

MESA, which stands for Maximum Entropy Spectrum Analysis, is an advanced mathematical method for filtering any cyclical components of different frequencies from complex signals or data sets. MESA has been used to identify the cyclic components of data sets that originate from chaotic bursts of radio waves, sub-terranean explosions, and, more recently, from military radar. An outgrowth of the scientific and engineering technique of Fourier analysis, MESA makes a radical break from earlier cycle-detection methods.

Traditional Fourier techniques such as the fast Fourier transform identify cycles with a high degree of certainty, but require very large data samplesan integral multiple of the wavelength of the cycle or cycles detected. Furthermore, even larger data samples are required to allow good resolution”—identification of concurrent cycles of unrelated wavelengths. These restrictions render traditional Fourier methods impractical for real-time market applications because cycles recurring over a long period tend to be apparent on a bar chart, without the aid of complex mathematics.

MESA, by contrast, focuses on the identification of the maximum amount of cyclic activity in a very short data sample. Whereas Fourier techniques work best for identifying cycles whose wavelengths are a tiny fraction of the length of the data samples, MESA can find a cycle in a sample only as long as the wavelength itself. This sensitivity equips MESA uniquely to pick out market cycles as they develop in fast-moving markets.

John F. Ehlers, a Ph.D. holder in electrical engineering and radar-jamming scientist, is the pioneer and acknowledged authority in applying MESA for trading purposes. His MESA end-of-day trading program was the first of its type. It is with his cooperation and supervision that MESA studies have been incorporated in Aspen Systems, in their first and only real-time implementation.

For a more complete exposition of the development, mathematics, and particular characteristics of MESA, refer to Ehlers authoritative book MESA and Trading Market Cycles.

Topics:

MESA and Oil Exploration

MESA and Radar Jamming

MESA and Market Analysis

Using MESA, by John Ehlers

Applying MESA Studies