Fisher transform is a crossover oscillator indicator.
As a crossover oscillator indicator,Fisher transform indicator was created by John Ehlers to help traders know whether the market is in oversold or overbought condition by transforming time series data into a Gaussian Normal distribution function.
Therefore in trading,fisher transform can be considered to be an indicator that is used to transform the price of any foreign exchange rate,price of securities ,price of commodities and price of stocks into a Gaussian Normal distribution .It can also be used to do the same for cryptocurrency which is a new market product. As crossover oscillator indicator, fisher transform has an oscillation at point 0.000 ranging from -1 to 1.As a crossover,it uses two crossover lines to give trading signals,,the fisher transform line which is blue in color and the signal line.
According to John Ehlers, Fisher transform is therefore calculated using the following formula;
Fisher transform= 1/2*natural logarithm{(1+x)/(1-x)}
NB;x is the transformation of price between the range of -1 to 1
Since fisher transform is based on crossover and has two crossover lines,the fisher transform which is blue in color and the signal line which is red in color,it therefore follows that trade signals will occur when these two lines crossover. This is further explained as below for both oversold and overbought market;
1. Fisher Transform oversold cryptocurrency market
Therefore,when the fisher transform crosses above the signal line at below 0.00,that will be an indication of an oversold market thus signaling the cryptocurrency trader to purchase a given amount of cryptocurrency with their USDT balance. The trader can either place a market buy order which will instantly be processed or they can place a limit buy order which will be processed when the market reaches their buy limit order price. This is indicated as from below;
The above represents the TRX market against USDT. Two points are being indicated. Three points are being indicated. There is point A ,point B and point C. Point A is the fisher transform while point B is the signal line. On the other hand, point C is the crossover point. At point C,the fisher transform has crossed above the signal line at below 0.00. This is an indication of an oversold condition at that point. This signals the cryptocurrency trader to purchase a given amount of TRX with their USDT balance. The trader can either place a market buy order which will be executed immediately or they can place a limit buy order which will be processed when the market reaches their limit buy order price. When the order is being processed,the account of the cryptocurrency trader will start increasing in value if the market is moving upwards
2. Fisher Transform overbought cryptocurrency market
Therefore,when the fisher transform crosses below the signal line at above 0.00,that will be an indication of an overbought market thus signaling the cryptocurrency trader to sell a given amount of cryptocurrency which he had previously purchased and is currently holding. The trader can either place a market sell order which will instantly be processed or he can place a limit sell order which will be processed when the market reaches their sell limit order price. This is indicated as from below;
The above represents the TRX market against USDT. Three points are being indicated. There is point A ,point B and point C. Point A is the fisher transform while point B is the signal line. On the other hand, point C is the crossover point. At point C,the fisher transform has crossed below the signal line at above 0.00. This is an indication of an overbought condition at that point. This signals the cryptocurrency trader to sell a given amount of TRX which he had previously purchased and is currently holding. The trader can either place a market sell order which will be executed immediately or he can place a limit sell order which will be processed when the market reaches their limit sell order price. When the order is being processed,the account of the cryptocurrency trader will have increased in value in terms of USDT.
cryptocurrency market is a highly volatile market. As a cryptocurrency trader,whenever you place a buy order,always make sure to apply risk management so that whenever your buy order goes against you, your account do not depreciate so much in value.
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