21 Fisher Transform

Fisher Transform takes the relative difference between the mean price of a stock and the historical lowest low and highest high, (res-scale between -1 to 1) and transform those difference following a gaussian curve (e.g., a log modification of the data). The log transformation basically adjust data with a saturation curve, such that the higher or lower a price gets the smaller that difference should become.

Fishers can be used over different time periods to better adjust toi specific trading time frames.

Extreme values of fishers can indicate trend reversals.

Figure 8.33: Fisher Transform

Lower consecutive highest in Fishers, can also indicate a trend saturation and a likely reversal, as shown in the image below.

Figure 8.34: Fisher Transform