What it is
Most oscillators drift slowly near their extremes. The Fisher Transform does the opposite: it stretches readings near the top and bottom of the range so turning points stand out clearly. The result is a line that swings well beyond +1 and -1, often to +3 or -3, and turns sharply.
It has no fixed upper or lower limit, so there are no textbook overbought numbers. Traders judge extremes against the line's own recent history on that market.
How it is calculated
1. Use the median price of each candle, (high + low) / 2. 2. Find the highest and lowest median price over the last 9 candles. 3. Rescale the current median price to sit between -1 and +1 within that range, smoothing it with the previous value. 4. Apply the Fisher formula: 0.5 x natural log of ((1 + x) / (1 - x)), and smooth with half of the previous Fisher value. 5. The signal line is simply the Fisher value from one candle earlier.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| Length | 9 | 2 to 100 | How many candles define the high to low range. Shorter (5 to 7) gives more, earlier turns; longer (13 to 20) gives fewer, bigger swings. |
How to read it
How to trade it
- 1
Check the bigger picture first, for example a 1 hour uptrend on US30.
- 2
On the 5 or 15 minute chart, wait for the Fisher line to drop below -2 during a pullback.
- 3
Enter long when Fisher crosses above its signal line on a closed candle.
- 4
Stop a few points beyond the pullback low, for example 30 to 50 points on US30.
- 5
Take profit when Fisher reaches its recent high readings and crosses back below its signal line, or at 2 times the stop.
The trade is wrong if price closes below the pullback low after entry, or if Fisher crosses straight back below its signal line and makes a new low.
WickSpeak writes a plain-English reading on the live candle for the Fisher Transform: what it is, whether it is at a stretched turn or mid-swing, how to trade the present reading and what would prove it wrong. In Playbook, a condition can check when the Fisher line crosses above or below its signal line, crosses above or below zero, stays above or below zero, or is rising or falling.
WickSpeak Fisher Transform is one of the extra WickSpeak versions of the oscillators. The line is coloured by strength: faint when the reading is weak, glowing when it is strong, mint above the zero line and pink below it. Crosses of the zero line are marked only once the candle has closed, so a marker never vanishes after it appears. A gold marker shows a stretched reading, the strongest few percent of the indicator's own range. Divergences between price and the line are drawn on both the chart and the indicator, and a chip shows the same reading on a higher timeframe.
Best markets and timeframes
Best on 5 minute to 1 hour charts of gold, US30 and NAS100 that swing within a range or trend in clear waves. In a one-way trending day it will flash many early turns that do not come.
Common mistakes
- Trading every signal-line cross. The line crosses often; only crosses after a stretched reading are worth attention.
- Using fixed levels from another market. Fisher has no upper limit, so what is extreme on gold may be normal on NAS100.
- Fighting the trend. In a strong trend the counter-trend crosses fail most often.
Works well with
Questions traders ask
What is a good Fisher Transform setting?
Ehlers' standard length is 9 or 10 candles. Shorter settings react sooner but give more false turns. Test any change on the market and timeframe you trade.
What is the signal line on the Fisher Transform?
It is the Fisher value from one candle earlier. A cross between the two simply shows the line has changed direction, which is why the signal can be very early.
Does the Fisher Transform repaint?
No. The value for a closed candle does not change. The live candle's value moves while the candle is forming, so wait for the close before acting on a cross.
Is the Fisher Transform good for scalping?
It can be, because it turns sharply and early. It works best when you only take crosses in the direction of the higher timeframe trend.