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Inverse Fisher Transform was first introduced by John Ehlers in an article published in May 2004 issue of the Technical Analysis of Stocks and Commodities magazine.
It is the inverse of the fisher transform which can be downloaded here Fisher Transform - Technical Indicator. It is well suited to transform oscillator indicators because it is easier to transform their result into the required input interval, which is in the range of [-5, 5]. The result of the Inverse Fisher Transform will be between -1 and 1.
If applied to big values the result has a big change to be -1 or 1. For that reason, a preliminary transformation must be done to any time-series passed as an argument to the inverse fisher transform.
Example of calculating the inverse fisher transform of the relative strength index:
a = rsi(14);
a = 0.1 * ( a - 50 ); // Interval Transformation
a = inverseft(a);
The inverse fisher indicator name is "inverseft". It has only one parameter, which is the time-series to transform.
RSI-based trading system:
a = rsi(14);
buy = a > 70;
Inverse Fisher Transform-based trading system:
a = 0.1 * ( rsi(14) - 50 );
a = inverseft(a);
a = (a + 1) * 50; // Restore the initial interval [0-100]
buy = a > 70;
