BCI Explan.

Brugler Cycle Indicator Explanation and Example

The Brugler Cycle Indicator, or BCI, was developed by Alan Brugler in the 1980's as a tool he hoped would get producers and traders on the correct side of the 4-8 week cyclical moves that are common in the agricultural and financial markets. He was looking for something that was tolerant of "noise", or random price swings against the prevailing trend, and which often cause false signals in other indicators. The BCI utilizes two lines which never cross, a moving average of the highs and a moving average of the lows. These are called the MAH and MAL respectively. The default length for the MAH is 10 bars. The default length on the MAL is 8 bars.

There are 5 rules that must be met to generate a new BCI buy signal. The opposite rules apply for a sell signal. In brief, they are:

CEC Rule. You must have two CEC's (Consecutive Extreme Closes). Those are closes above the MAH line (for a pending buy signal), with the second close higher than the first.
Day Three Rule. On Day 3, 4 or 5 of the breakout above the MAL, you need to begin a correction against the pending signal. For a pending buy signal, this is a bar with a lower close.
No Crossover Rule. The correction against the pending signal can occupy multiple bars. However, no close for a bar may be outside the opposite line. For a pending buy signal, the no bars during the correction may close below the MAL line. In the event of a crossover close, the pending signal is invalid, and the previous BCI signal is still in effect.
ADX Rule. The BCI is a trending market tool. Non-trending markets will result in a higher percentage of false signals. Do not use the BCI if a standard length (10-18 bar) ADX reading is below 20, or if it is declining on the day of the first CEC. In some markets, a rising ADX that is below 20 is acceptable.
Entry Rule. The position is entered on the first close in the direction of the pending signal, AFTER rules 2,3 and 4 have been met. The entry may be made prior to the close if the trend for that bar is clear.

In a strongly trending market, prices will rarely close outside the opposite line, and aggressive traders will often use such a signal to either a) take profits on a portion of their position or b) add to a position that is being driven by a larger degree chart (weekly, monthly, etc.).

As with all indicators, past performance is not necessarily indicative of future results.

THERE IS A RISK OF LOSS IN FUTURES AND OPTIONS TRADING. FUTURES TRADING IS NOT APPROPRIATE FOR ALL INDIVIDUALS. ANYONE ACTING ON THIS INFORMATION IS DOING SO AT HIS/HER OWN RISK. CONSULT THE FUTURES AND OPTIONS RISK DISCLOSURE STATEMENTS YOU SIGNED WITH YOUR BROKER BEFORE TRADING. PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.