A technical indicator that attempts to identify reversal points.
Overview
Introduced by John Elhers, the Fisher Transform is based on the article “Using the Fisher Transform” in the November 2002 issue of Stocks and Commodities Magazine.
It was designed to identify major price reversals with its rapid response time and sharp, clear turning points. The assumption is that prices do not have a Gaussian probability density function (PDF) (bell-shaped curve movement), but by normalizing price and applying the Fisher Transform you could create a nearly Gaussian PDF.
The Ehlers Fish Transform on a USD/CHF Daily Chart 4/12/2011
Source: VT Trader
Interpretation
Signals can be generated with pinpoint precision, according to Ehlers, by the crossover points of the Fisher and its signal line.
