The Smoothed Fisher Transform MT4 forex indicator is a popular trading oscillator composed of RSI and EMA.
The indicator fluctuates between 0 and 100 readings.
The oversold area is located between 0 and 12 readings while the overbought area is located between 88 and 100 readings.
Use this indicator together with a trend following indicator to built a complete trading solution.
Examples of good trend following indicators include moving averages, exponential moving averages and Ichimoku Kinko Hyo.
Next is to trade in the direction of the underlying trend as indicated by the trend following indicator.
Trend direction is up? Only take oversold signals from the Fisher and avoid the overbought signals.
Trend direction is down? Only take overbought signals from the Fisher and avoid the oversold signals.
The Fisher forex indicator can be used for scalping, day trading and swing trading purposes.
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Download the “smoothed-rsi-inverse-fisher-transform.mq4” MT4 indicator
Indicator Chart (EUR/USD H1)
The EUR/USD H1 chart below displays the Smoothed Fisher Transform forex indicator in action.
Basic Trading Signals
Signals from the Smoothed Fisher Transform forex MT4 indicator are easy to interpret and goes as follows:
Buy Signal: Open buy position when the indicator turns back above the 12 level from below.
Sell Signal: Open sell position when the indicator turns back below the 88 level from above.
Trade Exit: Close the open trade when an opposite signal occurs, or use your own method of trade exit.
Smoothed Fisher Transform and Zero Lag MACD MT4 Forex Strategy
This MT4 forex strategy combines momentum reversal signals from the Smoothed Fisher Transform Metatrader 4 Forex Indicator with trend direction confirmation from the Zero Lag MACD Indicator MT4.
The Smoothed Fisher Transform helps identify potential turning points when the indicator crosses back above or below key levels.
A buy signal occurs when the indicator turns back above the 12 level from below, and a sell signal occurs when it turns back below the 88 level from above.
The Zero Lag MACD confirms the broader trend direction, with values above zero indicating bullish conditions and values below zero indicating bearish conditions.
This strategy is designed for day trading on lower timeframes such as M5, M15, and H1.
It aims to capture short-term trend continuation moves after a price correction and momentum shift.
By requiring both a reversal signal and trend confirmation, this approach helps reduce noise and focus on trades that follow the dominant market direction.
Buy Entry Rules
- The Zero Lag MACD must be above zero, confirming a bullish trend.
- The Smoothed Fisher Transform indicator must turn back above the 12 level from below, signaling rising momentum.
- Enter a buy trade at the close of the candle where the Fisher indicator crosses above 12 while the MACD remains above zero.
- Place the stop loss below the most recent swing low or a nearby support level.
- Set the take profit near the next resistance area or based on average range for your timeframe.
- Exit early if the Smoothed Fisher Transform reverses back below 12 or if the Zero Lag MACD crosses below zero.
Sell Entry Rules
- The Zero Lag MACD must be below zero, confirming a bearish trend.
- The Smoothed Fisher Transform indicator must turn back below the 88 level from above, signaling falling momentum.
- Enter a sell trade at the close of the candle where the Fisher indicator crosses below 88 while the MACD remains below zero.
- Place the stop loss above the most recent swing high or a nearby resistance level.
- Set the take profit near the next support area or based on average range for your timeframe.
- Exit early if the Smoothed Fisher Transform reverses back above 88 or if the Zero Lag MACD crosses above zero.
Advantages
- The strategy combines reversal momentum with trend confirmation for more reliable entries.
- Suitable for multiple timeframes including M5, M15, and H1 to match different day trading styles.
- Clear entry and exit rules reduce emotional decision making during trading.
- Helps traders avoid entering trades against the broader trend by using the Zero Lag MACD filter.
- Can be applied to a variety of currency pairs and gold for frequent intraday setups.
Drawbacks
- The Smoothed Fisher Transform signals can lag slightly during sharp and rapid price moves.
- Enter and exit rules may produce late signals in highly volatile conditions, resulting in smaller profits.
- In ranging markets, momentum signals can generate false reversals, leading to losing trades.
- Requires active monitoring of the MACD and Fisher Transform to catch timely setups.
Case Study 1
On EURJPY M15 during the London session, the Zero Lag MACD was above zero, indicating bullish trend conditions.
The Smoothed Fisher Transform indicator crossed back above the 12 level from below after a small pullback.
A buy trade was entered and later closed for 34 pips when price approached the next resistance zone and the Fisher indicator began to weaken, capturing the continuation of the bullish move.
Case Study 2
On GBPAUD M5 during the New York session, the Zero Lag MACD was below zero, confirming a bearish trend.
The Smoothed Fisher Transform crossed back below the 88 level from above after a retracement.
A sell trade was placed and concluded for 28 pips when price reached a recent support level and the Fisher indicator showed signs of reversing upward, effectively capturing the intraday downward momentum.
Strategy Tips
- Always confirm the broader trend with the Zero Lag MACD before acting on Fisher Transform signals to improve accuracy.
- Use M5 for tighter scalps, M15 for standard intraday trades, and H1 for larger moves within the trading day.
- Consider session times and liquidity; London and New York often provide the best conditions for this strategy.
- Place stop losses near recent swing highs or lows to protect against sudden reversals.
- Take partial profits near key support or resistance areas and let the rest run if momentum remains strong.
- Track your trades in a journal to refine your understanding of how this strategy performs on different pairs and timeframes.
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Download the “smoothed-rsi-inverse-fisher-transform.mq4” Metatrader 4 indicator
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart pattern
Customization options: Variable (RSI Period, EMA Period, Alerts) Colors, width & Style.
Time frames: 1-Minute, 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: Oscillator
