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Miha Kralj
92709ef2ed
- Implemented Stochastic Oscillator (%K and %D) in Stoch.cs with streaming and batch processing capabilities. - Added validation tests for the Stochastic Oscillator in Stoch.Validation.Tests.cs, ensuring consistency with Skender.Stock.Indicators. - Created documentation for the Stochastic Oscillator in Stoch.md, detailing its mathematical formula, architecture, parameters, and common pitfalls. - Updated project file to include necessary numeric libraries for highest and lowest calculations.
61 lines
2.1 KiB
Markdown
61 lines
2.1 KiB
Markdown
# Fisher Transform (FISHER)
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## Overview
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The Fisher Transform converts price data into a Gaussian normal distribution using the inverse hyperbolic tangent function (arctanh), producing sharp turning points that aid in identifying potential price reversals. Developed by John Ehlers in 2002.
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## Formula
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```
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displacement = floor(period / 2) + 1
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normalized = 2 × (price − lowest) / (highest − lowest) − 1
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value = α × normalized + (1 − α) × value[1]
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value = clamp(value, −0.999, 0.999)
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Fisher = 0.5 × ln((1 + value) / (1 − value))
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Signal = α × Fisher + (1 − α) × Signal[1]
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```
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Where:
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- `highest` / `lowest` = highest high / lowest low over `period` bars
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- `α` = EMA smoothing factor (default: 0.33)
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- The transform applies arctanh to the smoothed, normalized price
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## Parameters
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| Parameter | Type | Default | Range | Description |
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|-----------|------|---------|-------|-------------|
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| period | int | 10 | 1–500 | Lookback for min/max normalization |
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| alpha | double | 0.33 | (0, 1] | EMA smoothing factor |
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## Outputs
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| Output | Description |
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|--------|-------------|
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| Fisher | Primary Fisher Transform line |
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| Signal | EMA-smoothed signal line |
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## Interpretation
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- **Extreme Values**: Fisher > +2 suggests overbought; Fisher < −2 suggests oversold
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- **Crossovers**: Fisher crossing above Signal = bullish; below = bearish
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- **Zero-Line**: Crossing zero indicates trend direction change
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- **Divergence**: Price vs. Fisher divergence warns of potential reversal
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- **Sharp Turns**: Fisher produces sharper peaks/troughs than raw oscillators
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## Limitations
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- Not bounded — extreme values depend on price volatility
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- Can produce whipsaw signals in choppy/ranging markets
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- Lagging due to EMA smoothing
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- Normalization range affected by lookback period choice
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- Domain protection (clamping to ±0.999) can compress extreme values
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## References
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- Ehlers, John F. "Using The Fisher Transform." *Stocks & Commodities*, 2002.
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- PineScript source: `fisher.pine`
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## Source
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[Fisher.cs](Fisher.cs) | [Tests](Fisher.Tests.cs) | [Validation](Fisher.Validation.Tests.cs)
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