SVE Stochastics IFT

The SVE Stochastics IFT, ak.a. the Inverse Fisher transform stochastics oscillator for NinjaTrader 8

The SVE Stochastics IFT by Sylvain Vervoort, ak.a. the Inverse Fisher transform stochastics oscillator, is an oscillator that combines the Inverse Fisher Transform (IFT) and Stochastic approaches, suggesting buying and selling opportunities.

Indicator Description

This SVE Stochastics IFT was described in the December 2011 issue of Stocks & Commodities (V. 29:12 (40-46): Applying The Put/Call Ratio Indicator).

A two input variables is used for the required stochastic period (30) and the slowing value (5), i.e. the summing average. In order to avoid unwanted whipsaw signals (during flat periods), the raw input closing prices are smoothed with the rainbow averaging principle, allowing more weight for the most recent data.

The other plot, the IFT, represents values derived after applying the Inverse Fisher Transform to values of the Stochastic plot. The basic stochastic formula is then applied to this smoothed value, converting it to a value between zero and 5 which is then used as input for the inverse Fisher transform.

The indicator can be used together with a moving average to consider long/short opportunities:
When prices are moving above the moving average consider to:

  • Go long when the SVE_Stoch_IFT cross above 30
  • Exit long when the SVE_Stoch_IFT cross below 60

When prices are moving below the moving average consider to:

  • Go short when the SVE_Stoch_IFT cross below 60
  • Exit short when the SVE_Stoch_IFT cross above 30

Other library indicators

The SVE Stochastics IFT is most reliable when aligned with the mid/higher time frame trend bias and Volume / Range Analysis. You may for example review the trend bias using the Donchian Channel, Heikin Ashi Candles, the Regression Channel or the Daily Regression Channel. For Volume / Range Analysis you may have a look at the Force Index, Relative Volume or Relative Ranges. The Donchian Channel, Heikin AshiRegression Channel, Relative Volume and the Relative Ranges were reviewed in our Indicator Spotlight.

Apart from the SVE Stochastics IFT, the advanced oscillators category also features the Connors RSI and the Laguerre RSI. The momentum oscillator category furthermore has the Awesome Oscillator and a new an improved versions of the standard Relative Strength Index, the Stochastics RSI, Slow RSI and the Traders Dynamic Index (TDI). Additional info on the TDI indicator, which applies the RSI to three timeframes, was also discussed our Indicator Spotlight.

The indicator is available for NinjaTrader 8.