Fisher Transform Smooth
This is a smooth version of Fisher, what it really does;
Value1 is a function to normalize price within its last 10 day range. The period for the range is adjustable as an input. Value1 is centered on its midpoint and then doubled so that Value1 will swing between the –1 and +1 limits. Value1 is also smoothed with an EMA whose alpha is 0.33. The smoothing may allow Value1 to exceed the ten day price range, so limits are introduced to preclude the Fisher Transform from blowing up by having an input value larger than unity . The Fisher Transform is coded to delayed by one bar to provide a crossover system that identifies the cyclic turning points.
If Fisher transformed indicator has a value of −1, it has a value of negative one standard deviation and therefore there is a 32 percent chance prices will go lower. If the transformed indicator has a value of −2, it has a value of negative two standard deviations, and therefore there is only an 8 percent chance prices will go lower. This is a high-probability buying opportunity. At a level of −3, the negative 3 standard deviations means there is only a 2 percent chance of the prices going lower. Fisher transform values are symmetrical, so positive deviations are high-probability indications to exit a long position or to sell short. If the prices are normalized to fall within the range from –1 to +1 and subjected to the Fisher Transform , the extreme price movements are relatively rare events. This means the turning points can be clearly and unambiguously identified. “J.Ehler”
Bollinger Bands measures 21 period of FTransfrom’s expansion (deviations). When fisher very close to bands or touches the bands it tells that FT is due for crossover. The most profitable trades (entry/exits) are the crossovers by the bands on extreme deviations, and it doesn’t matter what time frame you are looking, FT always will be inside the bands, it hardly goes above or below bands, where you will be able to catch the market turn out points. For trading Concept DM
Value1 is a function to normalize price within its last 10 day range. The period for the range is adjustable as an input. Value1 is centered on its midpoint and then doubled so that Value1 will swing between the –1 and +1 limits. Value1 is also smoothed with an EMA whose alpha is 0.33. The smoothing may allow Value1 to exceed the ten day price range, so limits are introduced to preclude the Fisher Transform from blowing up by having an input value larger than unity . The Fisher Transform is coded to delayed by one bar to provide a crossover system that identifies the cyclic turning points.
If Fisher transformed indicator has a value of −1, it has a value of negative one standard deviation and therefore there is a 32 percent chance prices will go lower. If the transformed indicator has a value of −2, it has a value of negative two standard deviations, and therefore there is only an 8 percent chance prices will go lower. This is a high-probability buying opportunity. At a level of −3, the negative 3 standard deviations means there is only a 2 percent chance of the prices going lower. Fisher transform values are symmetrical, so positive deviations are high-probability indications to exit a long position or to sell short. If the prices are normalized to fall within the range from –1 to +1 and subjected to the Fisher Transform , the extreme price movements are relatively rare events. This means the turning points can be clearly and unambiguously identified. “J.Ehler”
Bollinger Bands measures 21 period of FTransfrom’s expansion (deviations). When fisher very close to bands or touches the bands it tells that FT is due for crossover. The most profitable trades (entry/exits) are the crossovers by the bands on extreme deviations, and it doesn’t matter what time frame you are looking, FT always will be inside the bands, it hardly goes above or below bands, where you will be able to catch the market turn out points. For trading Concept DM
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Tom DeMark & Fibonacci & Harmonics & Fisher Transform, Renko. Kagi, PA ,Chart Patterns trader
Tom DeMark & Fibonacci & Harmonics & Fisher Transform, Renko. Kagi, PA ,Chart Patterns trader