Ehlers’ Fisher Transform is one of forex technical indicator used in forex technical analysis, this indicator is useful to use and will be helpful for many traders. Ehlers’ Fisher Transform is based Stocks and Commodities Magazine article, “Using the Fisher Transform” by John Ehlers published on November 2002.

Ehlers’ Fisher Transform was designed to clearly define major price reversals with its rapid response time and sharp, distinct turning points. It is based on the assumption that prices do not have a Gaussian probability density function (PDF) (bell-shaped curve movement).

Prices do not have a Gaussian PDF. By normalizing prices or creating a normalized indicator such as the RSI or Stochastic, and applying the Fisher Transform, a nearly Gaussian PDF can be created.

Such a transformed output creates the peak swings as relatively rare events. The sharp turning points of these peak swings clearly and unambiguously identify price reversals in a timely manner. As a result, superior discretionary trading can be expected and higher performing mechanical trading
systems can be developed by using the Fisher Transform.