SuperTrend Fisher

The SuperTrend Fisher indicator combines the statistical normalization of the Fisher Transform with the trend-following logic of the SuperTrend to provide a comprehensive oscillator for identifying price reversals and market momentum.

Usage

The Usage section describes how the script can be used to gauge market conditions:

• Trend Identification: Users can observe the relationship between the Fisher line and the SuperTrend line. When the Fisher line is above the SuperTrend line, the market is considered in a bullish phase (colored green). Conversely, when the Fisher line is below the SuperTrend line, it is in a bearish phase (colored red).
• Momentum Shifts: Crossovers between the Fisher line and its EMA (Slow EMA) or the zero line can serve as early signals for shifts in market sentiment.
• Extreme Market Conditions: The indicator plots specific overbought (OB) and oversold (OS) levels. When the Fisher line enters these shaded zones, it suggests the market may be overextended, potentially leading to a reversal or correction.
• Alerts: Traders can set alerts for zero-line crosses, SuperTrend crossovers, and entries into overbought/oversold territories to stay informed of critical movements.

Details

The indicator operates using a multi-step calculation process:

1. Detrended Price Oscillator (DPO): It begins by calculating a DPO normalized by the Average True Range (ATR) to isolate price cycles from the broader trend.
2. Fisher Transform: This normalized value is processed through the Fisher Transform algorithm, which converts price data into a Gaussian probability distribution. This makes turning points and extremes much clearer than on standard oscillators.
3. Smoothing: A Hull Moving Average (HMA) is applied to the Fisher values to reduce noise while maintaining responsiveness.
4. SuperTrend Logic: A custom SuperTrend calculation is applied directly to the Fisher values rather than price. This creates a dynamic trailing stop-loss style boundary that reacts to the momentum of the Fisher Transform.

Settings

• Fair-value Period: Determines the period used for the initial DPO and standard deviation calculations.
• EMA Length: Sets the period for the slow EMA plotted alongside the Fisher line.
• Fisher Period: The lookback period used for the Fisher Transform calculation.
• SuperTrend Factor: The multiplier that determines the distance of the SuperTrend bands from the Fisher line.
• SuperTrend Period: The lookback period used for the ATR component within the SuperTrend calculation.
• Up/Down Color: Customizes the visual colors for bullish and bearish trends.

FAQ

How do I interpret the colored fills?

The fill between the Fisher line and the SuperTrend line represents the current trend direction. A green fill indicates the Fisher momentum is trending upward relative to its volatility bands, while a red fill indicates downward momentum.

What do the fixed horizontal zones represent?

The horizontal zones at the top and bottom of the oscillator represent extreme overbought and oversold levels (fixed at +4 and -4 respectively). These are areas where the price action is statistically stretched.

How can I access the SuperTrend Fisher?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.