Fisher Transform indicator
Fisher Transform indicator
Fisher Transform or Fish indicator is used to determine price reversals.
The Fisher Transform formula transforms the probability density function of any waveform to a function similar to a Gaussian probability density function.
The function can transform instrument prices as well as any technical indicator. For example you can apply the Fisher Transform to the Relative Strength Index indicator. The transformed time series have very sharp turning points and therefore produce clear and precise bullish and bearish signals.
Bullish and bearish signals are generated when the Fisher line crosses above or below its signal line, which is the fisher transform one bar ago.
Here is the formula of the Fisher signal line:
Value:=0.66*((Price-MinL)/(MaxH-MinL)-0.5)+0.67*Value_prev;
if Value>0.99 then Value:=0.999;
if Value<-0.99 then Value:=-0.999;
Fish:=0.5*ln((1+Value)/(1-Value))+0.5*Fish_prev;
MaxH is the highest high for the last period candles
MinL is the lowest low for the last period candles
Price can be High, Low, Open, Close, Middle, Typical and Weighted. (Middle is set by default).
Multiplier is smoothed second line.