Market State indicators try to determine if the market is trending or ranging. Each state of the market is best traded with different criteria and indicators. Trending markets should generally be traded with momentum-style indicators, and ranging markets should generally be traded with oscillators.
The Osi Cycle-Trend Discriminator uses that idea to determine the current state of the market. It essentially compares the amplitude of the dominant market cycle wave to a momentum indicator. Whichever is larger determines the state of the market. If the momentum is larger than the cycke amplitude, the market is either in a trend or about to break into one. On the other hand, if the cycle amplitude is greater, then the up and down movements of proce are exceeding the proce thrusts, so it should be more profitable to trade those movemenets. Ergo, we think that in that case, the market is in a range.