Guide · Mean reversion
Does Fisher Transform work?
Across 375 stocks, Fisher Transform cut the worst fall on 73%, beat buying and holding on risk-adjusted return on 18% and on raw return on 18%. Mainly a seatbelt: it softened the big falls on most stocks, but usually gave up return to do it.
What it predicts
Ehlers stretches price's place in its 10-day range so that turning points stand out sharply. Hold while the Fisher line is above its own value a day earlier.
- Take the midpoint of each day's high and low, place it in its 10-day range on a −1 to +1 scale, smooth it, and apply the Fisher transform, which stretches values near the edges.
- In when the Fisher line crosses above its trigger, which is yesterday's Fisher value.
- Out when it crosses below.
Mean reversion plays bet that short, sharp moves tend to snap back. The family guide
How to use it
- It trades often (about 49 switches a year per stock), so costs, spreads and taxes eat into it more than the backtest's 0.05% per switch suggests.
- Expect to be wrong more often than right: only 37% of its calls worked. Its results come from the size of the winners, so following it means sitting through strings of small losses.
- It worked best on Energy & power (34% beat holding on risk-adjusted return) and worst on Media & telecom (0%).
- Use it as one input. Your signal combines the plays you count with the other factors you weight into one call.
When it worked
Fisher Transform did best against holding in the COVID drop (+15% median gap) and worst in the 2020–21 rally (−23%). Median gap in return against holding the same stock (per year over stretches longer than 18 months; crypto excluded).
| 2008 crash | Recovery 2009–19 | COVID drop | 2020–21 rally | 2022 bear | Since Oct 2022 | |
|---|---|---|---|---|---|---|
| Fisher Transform | +13% | −12% | +15% | −23% | +8% | −12% |
Where it worked
By kind of stock: how often it beat holding on risk-adjusted return, and the median Sharpe ratio gap.
| Group | Beat holding, risk-adjusted | Sharpe gap |
|---|---|---|
| Energy & power | 34% | -0.14 |
| Micro caps | 33% | -0.09 |
| Real estate | 32% | -0.12 |
| Financials | 23% | -0.21 |
| Industrials & rentals | 22% | -0.21 |
| Metals & mining | 22% | -0.18 |
| Industrials & materials | 14% | -0.23 |
| Consumer & retail | 12% | -0.39 |
| Healthcare | 11% | -0.21 |
| Software & devices | 9% | -0.32 |
| Sectors | 0% | -0.38 |
| Indexes & ETFs | 0% | -0.30 |
| Big tech | 0% | -0.36 |
| Semiconductors | 0% | -0.39 |
| Media & telecom | 0% | -0.27 |
Where it helped most
Sharpe ratio gap against holding, stocks with 3+ years of history
Right now
Fisher Transform holds 248 of 377 names as of the Oct 13, 2026 close.
Changed its call in the last two weeks:
Backtest results since 2005 (or as long as each stock has traded), against holding the same stock over the same dates, after 0.05% per switch. Past results don't promise future ones. This analysis does not constitute trading advice. Please meet with an advisor or independently review sources before making any decision.