An oscillator that pushes price toward a normal distribution via the Fisher transform, turning soft, rounded turns into sharp, unmistakable spikes.
The Fisher Transform is an oscillator devised by John Ehlers, an engineer with a background in signal processing.
It starts from a single observation. Most technical indicators quietly assume that their values follow a normal distribution, a bell curve. But raw price data does not.
Price tends to loiter near the centre, and the extreme readings at either end appear only rarely. The result is a distribution with a fat middle and short tails. Left as is, it is hard to tell whether the current move is truly extreme.
So Ehlers borrowed the Fisher z-transformation from statistics. First normalize price into the range −1 to +1, then apply the Fisher transform to stretch that distribution toward a normal one.
The effect is that ordinary price action gets compressed near zero, while only the market's turning points jut out as sharp spikes. A waveform that was a gentle range of hills is rebuilt into needle-sharp peaks and troughs. That is what the Fisher Transform really is.
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