Fisher Indicator

Fisher Indicator

The Fisher Indicator finds overbought and oversold levels to identity key market reversals.

The Fisher Indicator identifies potential reversals. Developed by J. F. Ehlers, the indicator is based on the assumption that prices do not follow a normal distribution and exhibit non-linear behavior.

The indicator is primarily used to identify overbought and oversold conditions in the market, which can indicate potential trend reversals.

It transforms the price data into a Gaussian probability distribution, making it easier to identify extreme price movements.

The indicator starts by calculating the midpoint price, which is the average of the high and low prices. Then, it measures the difference between the current midpoint price and the previous midpoint price. By tracking these differences over a specific period, it assesses the rate of change in price.

The Fisher Transform Indicator then normalizes the rate of change by summing the absolute differences between the current midpoint price and the previous midpoint price over the past N periods.

This normalization process helps to standardize the values and make them comparable across different timeframes. By doing so, it aims to generate clearer and more reliable signals compared to traditional oscillators.

How to use the Fisher Indicator for MT4?

The above USD/JPY H4 chart shows the indicator. The Fisher Indicator produces values that oscillate between ranges of -1.0 to +1.0. Values above +0.5 indicate overbought conditions, suggesting a downward reversal. Conversely, values below -0.5 indicate oversold conditions, suggesting an upward reversal.

Conclusion
The Fisher Indicator for MT4 identifies potential market reversals. By transforming price data into a Gaussian probability distribution, it emphasizes extreme price movements and helps identify turning points in the price trend.