IFT (CCIv2, STO, RSI)

The IFT (CCIv2, STO, RSI) indicator combines three classic momentum oscillators—CCI, Stochastic, and RSI—transformed via the Inverse Fisher Transform (IFT) to provide a unified view of overbought and oversold conditions. This tool aims to sharpen signal clarity by normalizing various oscillator types into a consistent bounded range, helping traders identify potential trend reversals and momentum shifts more effectively.

Usage

The Usage section focuses on interpreting the three individual IFT lines and their combined average. Traders can use the indicator to spot extremes in market sentiment when the lines enter the overbought (above 0.75) or oversold (below -0.75) zones.

• Individual Oscillators: The CCI, Stochastic, and RSI components are plotted individually, allowing users to see which specific momentum factor is leading or lagging.
• Average Line: The thick, color-changing line represents the mean of all three IFT values. It turns green when sloping upwards and red when sloping downwards, providing a quick visual cue for short-term momentum direction.
• Signal Generation: A common strategy involves looking for the average line to cross back into the neutral zone from extreme levels (e.g., crossing above -0.75 for a bullish signal or below 0.75 for a bearish signal).

Details

The indicator applies the Inverse Fisher Transform formula (exp(2*x) - 1) / (exp(2*x) + 1) to pre-processed versions of the CCI, Stochastic, and RSI oscillators.

1. Pre-processing: Each raw oscillator is scaled and smoothed using a Weighted Moving Average (WMA) to prepare the data for the transform.
2. Transformation: The IFT is applied to force the values to stay within a range of -1 to +1, with most values clustering near the extremes. This creates a "square wave" effect that makes turning points more distinct than traditional oscillators.
3. Aggregation: By averaging the three transformed values, the indicator filters out noise that might appear in a single oscillator, providing a more robust consensus of momentum.

Settings

• Global Length: Sets the lookback period for the CCI, Stochastic, and RSI calculations, as well as the length for the smoothing WMA.

FAQ

How do I interpret the colors of the average line?

The average line changes color based on its slope: green indicates increasing momentum (upward slope), while red indicates decreasing momentum (downward slope).

What do the levels 0.75 and -0.75 represent?

These are the overbought and oversold thresholds. Because of the Inverse Fisher Transform, values tend to reach these levels quickly and stay there until a significant change in momentum occurs.

How can I access this indicator?

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