What it does
The Fisher Transform, introduced by John Ehlers, converts price into a series with sharper, more clearly defined turning points. It normalises the median price into a range of -1 to +1 and then applies the Fisher transformation, which stretches values near the extremes. The result is an oscillator that tends to make crisp peaks and troughs. This version plots the Fisher line, coloured green while it is above its trigger and red while it is below, plus a trigger line equal to the Fisher value one bar earlier.
How it works
- Median price = (high + low) / 2.
- Over the lookback, find the highest and lowest median price.
- Normalised position = (median - lowest) / (highest - lowest) - 0.5, which lies between -0.5 and +0.5.
- Smoothed value = 0.66 x normalised position + 0.67 x previous smoothed value, limited to between -0.999 and +0.999.
- Fisher = 0.5 x ln((1 + value) / (1 - value)) + 0.5 x previous Fisher.
- Trigger = previous bar's Fisher.
These are the published smoothing constants for the indicator. The Fisher line is unbounded, so the reference levels at +1.5 and -1.5 are guides rather than hard limits.
How to use it
- Crosses: the Fisher line crossing above its trigger signals that momentum has turned up; crossing below signals it has turned down. These crosses are frequent, so they are most useful as timing within a bias you already have.
- Extremes: readings far beyond the reference levels show a stretched move, and a cross back toward zero from there often marks a swing turning point.
- Zero line: staying above zero suggests price is in the upper part of its recent range.
Many traders use the Fisher Transform with a trend filter such as a longer moving average and confirm entries at support and resistance. Compare its behaviour with the RSI to see which suits your style.
Settings
| Input | Default | What it changes |
|---|---|---|
| Lookback | 10 | Longer lookbacks slow the oscillator and reduce crosses |
| Upper reference level | 1.5 | Position of the upper dotted level |
| Lower reference level | -1.5 | Position of the lower dotted level |
| Popup alert | false | Alerts once per bar on a closed-bar cross |
| Push notification | false | Sends cross alerts to the MT5 mobile app |
Limitations
- The transformation exaggerates extremes, so it reacts strongly to small changes near the edges of the range and can whipsaw.
- In strong trends the line can stay at extreme values while price keeps moving.
- The recursive smoothing means early bars on the chart are a warm-up period.
- The live bar's value moves until the bar closes; alerts use closed bars only.