[blackcat] L2 Ehlers Inverse Fisher RSI

21 Kas 2020

Level: 2

Background

John F. Ehlers introuced the Inverse Fisher Transform of RSI in May, 2004.

Function

"The Inverse Fisher Transform," describes the calculation and use of the inverse Fisher transform by Dr. Ehlers in 2004. The transform is applied to any indicator with a known probability distribution function, but this script offers a sample transforms: RSI. I have created inputs for the trigger levels for entry and exit so that the user may adjust these levels as desired.

In his article, Dr. Ehlers states the inverse Fisher transform can work with any oscillator, and that values between -1 and 1 are more suited for the transform calculations. Here is one version of the inverse Fisher transform of RSI. This version takes the highest and lowest value of the RSI and normalizes the scale to a range of -1 to 1. John Ehlers shows how to use the inverse Fisher transform (IFT) to compress oscillator-type indicators to give clear trading indications of when to buy or sell. The IFT is a nonlinear transformation that changes the probability distribution, so for example, unbounded indicators can be transformed into bounded indicators with a high probability of being either +1 or -1.


Key Signal

IFish--> Ehlers Inverse Fisher RSI fast line
Trigger--> Ehlers Inverse Fisher RSI slow line

Pros and Cons

100% John F. Ehlers definition translation, even variable names are the same. This help readers who would like to use pine to read his book.

Remarks

The 68th script for Blackcat1402 John F. Ehlers Week publication.

Readme

In real life, I am a prolific inventor. I have successfully applied for more than 60 international and regional patents in the past 12 years. But in the past two years or so, I have tried to transfer my creativity to the development of trading strategies. Tradingview is the ideal platform for me. I am selecting and contributing some of the hundreds of scripts to publish in Tradingview community. Welcome everyone to interact with me to discuss these interesting pine scripts.

The scripts posted are categorized into 5 levels according to my efforts or manhours put into these works.

Level 1 : interesting script snippets or distinctive improvement from classic indicators or strategy. Level 1 scripts can usually appear in more complex indicators as a function module or element.

Level 2 : composite indicator/strategy. By selecting or combining several independent or dependent functions or sub indicators in proper way, the composite script exhibits a resonance phenomenon which can filter out noise or fake trading signal to enhance trading confidence level.

Level 3 : comprehensive indicator/strategy. They are simple trading systems based on my strategies. They are commonly containing several or all of entry signal, close signal, stop loss, take profit, re-entry, risk management, and position sizing techniques. Even some interesting fundamental and mass psychological aspects are incorporated.

Level 4 : script snippets or functions that do not disclose source code. Interesting element that can reveal market laws and work as raw material for indicators and strategies. If you find Level 1~2 scripts are helpful, Level 4 is a private version that took me far more efforts to develop.

Level 5 : indicator/strategy that do not disclose source code. private version of Level 3 script with my accumulated script processing skills or a large number of custom functions. I had a private function library built in past two years. Level 5 scripts use many of them to achieve private trading strategy.