[GnAsHeR] Inverse Fisher Transform on STOCHASTIC – IFTSTOCH

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  • — Inverse Fisher Transform on STOCHASTIC indicator


    — The purpose of technical indicators is to help with your timing decisions to buy or sell. Hopefully, the signals are clear
    — and unequivocal. However, more often than not your decision to pull the trigger is accompanied by crossing your
    — fingers. Even if you have placed only a few trades you know the drill.
    — The Fisher Transform can be applied to almost any normalized data set to make the resulting PDF nearly Gaussian,
    — with the result that the turning points are sharply peaked and easy to identify.
    — The Fisher Transform is defined by the equation
    — 1) Whereas the Fisher Transform is expansive, the Inverse Fisher Transform is compressive. The Inverse Fisher Transform
    — is found by solving equation 1 for x in terms of y. The Inverse Fisher Transform is:
    — 2) The transfer response of the Inverse Fisher Transform is shown in Figure If the input falls between –0.5 and +0.5,
    — the output is nearly the same as the input.
    — For larger absolute values (say, larger than 2), the output is compressed to be no larger than unity .
    — The result of using the Inverse Fisher Transform is that the output has a very high probability of being either +1 or –1.
    — This bipolar probability distribution makes the Inverse Fisher Transform ideal for generating an indicator that provides
    — clear buy and sell signals.

    — Author: KıvanÇ @fr3762 twitter – ported by GnAsHeR twitter : @Eris Kucukoglu

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