Filed Under (Forex MT4 Indicators) by ForexDigg on 19-07-2008
THE INVERSE FISHER TRANSFORM
By John Ehlers
The purpose of technical indicators is to help with your timing decisions to buy or sell. Hopefully, the signals are clear and unequivocal. However, more often than not your decision to pull the trigger is accompanied by crossing your fingers. Even if you have placed only a few trades you know the drill.
In this article I will show you a way to make your oscillator-type indicators make clear black-or-white indication of the time to buy or sell. I will do this by using the Inverse Fisher Transform to alter the Probability Distribution Function (PDF) of your indicators. In the past I have noted that the PDF of price and indicators do not have a Gaussian, or Normal, probability distribution. A Gaussian PDF is the familiar bell-shaped curve where the long “tails” mean that wide deviations from the mean occur with relatively low probability. The Fisher Transform can be applied to almost any normalized data set to make the resulting PDF nearly Gaussian, with the result that the turning points are sharply peaked and easy to identify.
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When the first time i trade online Forex i found this great e book from ForexFactory.com maybe you will find the thread at the first page at ForexFactory.com. Phillip Nel really tech me how to use MACD at 4 hour time frame, but not just like that i try making the 89 Simple Moving Average at the 30mnt and 1 hour time frame it give me some pips to hehehhe, btw this really great e book Two Thumbs UP for Phillip Nel if i can i wanna give three or five Thumbs UP ….
View cut from the e book;
I stopped counting the pips for the April 2006 testing as it completely
convinced me of the success of this method. I randomly tested it using previous years
and the results were amazing. Average of 300+ pips per month and then I only trade
the trades that gives signals at these times 17:00, 21:00 and 01:00 (GMT +2). It gives
between 8-10 deals per month using the mentioned timeframes.. (I use Metatrader and
data supply by MIG.)
If you use patterns in the MACD that occur regular that gives results and use
them every time they occur you will most definitely make money.
I haven’t discuss nor used trendlines so far in this document and when you add
them it will most definitely helps you in defining your exit levels. The entry level are
determine by the MACD but the exit or profit levels is determine by support and
resistance levels. I use the moving averages as described earlier as well as Fibonacci
levels and then most definitely trendlines and price levels. I normally take the daily
graph and draw the trendlines according to it and then go to the 4 hour graph. I make
them nice and thick so that I can see them. Then I draw the different price levels such
as 1.2900, 1.3000, 1.3100 etc. It is amazing to see how the price find support and or
resistance at these levels.
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