Original Ehlers fisher transform is using an adjusted RSI in a fisher transform calculation in order to further normalize and emphasize the RSI values in order to be able to spot market conditions in easier way.
It is adding 2 steps:
- floating levels usage option
- in case that the floating level is not to be used, setting the floating level period to less than or equal to 1 will turn the level from floating to fixed levels
- smoothing the RSI value (and that way it filters some of the possible insignificant changes
- usual set of average types can be used for smoothing :
- simple moving average (SMA)
- exponential moving average (EMA)
- smoothed moving average (SMMA)
- linear weighted moving average (LWMA)
You can use the color changes of the indicator as signals.