The indicator is inspired by John Ehlers' article "Using The Fisher Transform" published in November 2002 in the "Technical Analysis Of Stock & Commodities" magazine.
The indicator is based on the assumption that the price does not have Gaussian density but something similar can be created by normalizing the price and applying Fisher Transform. As a result, fluctuation tops will definitely show price reversals. The recommended period is equal to 10.
Fisher indicator calculates minimum and maximum price levels in previous history, determines direction of a trend and forecasts its reversal. Fisher can be especially useful as a basic indicator trend in a trading system. Fisher positive value is a first buy signal, while negative value forms a sell signal. It is possible to find optimal period for maximums and minimums calculation (the only Fisher indicator parameter) to avoid false signals.
Author: Nikolay Kositsin