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

The indicator is available for NinjaTrader 8.