Module: Quant::Mixins::FisherTransform

Included in:
Indicators::Indicator
Defined in:
lib/quant/mixins/fisher_transform.rb

Overview

Fisher Transforms • Price is not a Gaussian (Bell Curve) distribution, even though many

technical analysis formulas falsely assume that it is. Bell Curve tails
are missing.
  – If $10 stock were Gaussian, it could go up or down $20
  – Standard deviation based indicators like Bollinger Bands
    and zScore make the Gaussian assumption error

• TheFisher Transform converts almost any probability distribution

in a Gaussian-like one
  – Expands the distribution and creates tails

• The Inverse Fisher Transform converts almost any probability

distribution into a square wave
  – Compresses, removes low amplitude variations

Instance Method Summary collapse

Instance Method Details

#fisher_transform(value) ⇒ Object Also known as: fisher, ft

The absolute value passed must be < 1.0



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# File 'lib/quant/mixins/fisher_transform.rb', line 35

def fisher_transform(value)
  raise ArgumentError, "value (#{value}) must be between -1.0 and 1.0" unless value.abs <= 1.0

  result = 0.5 * Math.log((1.0 + value) / (1.0 - value))
  result.nan? ? 0.0 : result
rescue Math::DomainError => e
  raise Math::DomainError, "#{e.message}: cannot take the Log of #{value}: #{(1 + value) / (1 - value)}"
end

#inverse_fisher_transform(value, scale_factor: 1.0) ⇒ Object Also known as: ift

inverse fisher transform www.mql5.com/en/articles/303



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# File 'lib/quant/mixins/fisher_transform.rb', line 23

def inverse_fisher_transform(value, scale_factor: 1.0)
  r = (Math.exp(2.0 * scale_factor * value) - 1.0) / (Math.exp(2.0 * scale_factor * value) + 1.0)
  r.nan? ? 0.0 : r
end

#relative_fisher_transform(value, max_value:) ⇒ Object Also known as: rft 



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# File 'lib/quant/mixins/fisher_transform.rb', line 29

def relative_fisher_transform(value, max_value:)
  max_value.zero? ? 0.0 : fisher_transform(value / max_value)
end