Fisher transform for binary options
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You have to check out a dozen to find one gem. It is based on complex mathematical theories that I have never heard of, such as probability density functions, and others that I have. In simplified terms, it transforms the ordinary Brownian and stochastic functions into something completely different.
One thing to note is that the Fisher Transform indicator can be applied to prices as well as other indicators. It displays on a chart as a pair of lines moving above fisher transform for binary options below 0 with extremes at both sides.
How does the Fisher Transform Indicator Works The indicator transforms prices into a sine wave that seeks to pinpoint extremes in the market.
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- It is important to understand how certain technical analysis tools work in order to use them correctly.
- Instead, it simply gets to the point of explaining what its software can free paper trading platform do.
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Extremes where prices are likely to revert to a more normalized level. The wave can be based on opening, closing, high, low or average prices and can be smoothed or not.
The basic signal occurs when the current FTL line crosses over or under the signal line but other, many strong signals occur when the indicator reaches extreme levels.
In a sense it is a form of mean reversion, when prices reach extreme levels when compared with recent price action then the indicator will also reach an extreme level.
Once that extreme is reached a reversal to the mean prices can be expected.
Signals appear to be fairly straight forward and when you combine the two together they appear to be especially strong. Looking at the Fisher, it gives a signal in early October that it is a reversal of the bearish extreme and a bullish crossover.
This signal comes when the asset is testing long term support and is confirmed by the MACD later on. Fisher can also be used in other ways similar to MACD, stochastic and other oscillators. It appears to be a good and useful tool and one that I will most definitely keep using.
However, like all tools even this one must suck sometime. I suggest using it along with other indicators for confirmation because every good tool is better when it gets confirmed by another. From what I have learned so far this is a fantastic indicator and one that bears more study. The signals are easy and the tool is very adaptable to day trading.
It is similar to the PSAR in that it can provide buy and sell signals in any market. The signals it gives the lead to other indicators like MACD.