Fourier Extrapolator MT4. An unusual instance among predictive algorithms
As a rule, the highest profit on Forex is brought by trades in which it is possible to predict a trend reversal even before its actual reversal. In the traders' environment, the attitude towards predictors of indicators is ambiguous. Most of these algorithms build their prediction models by mirroring historical markup.
The Fourier Extrapolator indicator does not follow the same path but uses mathematical principles when building a forecast. From the name of the instrument, it becomes obvious that its developer used some of the provisions of Fourier's theory, which has found application in many areas of human activity, from theoretical physics to the creation of musical instruments.
Within the Forex market, this theory is used as follows - the Fourier Extrapolator indicator automatically examines the amplitudes of price fluctuations over several periods at once and then selects from them the models, the parameters of which most closely correspond to the third harmonic. Of course, this interpretation is not entirely clear for those who are unfamiliar with the complex Fourier theory. Nevertheless, it does not hurt to use this algorithm in trading, knowing the stages of its calculations, which can be divided into four steps:
- At the first stage, the algorithm virtually marks several segments [T; 0], [T-1; 0], [T-2; 0], [T-3; 0], etc., where T is the period calculation, and 0 is the current quote (the price is fixed at the moment Fourier Extrapolator is installed on the chart);
- On each of the segments, the vibration amplitude is calculated;
- If among the obtained values there is an indicator corresponding to the third harmonic (T / 3), the wave of this segment is extended into the future;
- In the event that the harmonics were found on several segments at once, all obtained projections are averaged, after which the final result is displayed on the graph.
These stages implement the Fourier theory in this indicator.
The following editable parameters are available in the indicator settings:
- T is the base period, through which the duration of the longest interval for searching for harmonics is set;
- Shift - a shift of the starting point of the projection along the time axis, which is used to assess the quality of modeling in the past;
- The show_profit parameter - enable/disable the virtual equity line;
- alert - if the value is true, the predictor indicator will display a special window that lists the segments whose harmonics were involved in the construction of the averaged forecast.
As with all predictor indicators, this tool displays a light green forecast line designed to inform the trader about further price movement.
The peculiarity of this tool, as mentioned above, lies in the fact that it does not use historical models of behavior, but builds its own predictions based on Fourier theory. Experiments with Fourier Extrapolator show pretty good results for his predictions. But in order to fully trust its methodology, the trader should independently study the forecasts of this indicator and adjust its parameters to the traded asset through careful experiments.
Tip: Can’t open the downloaded archive file (ZIP or RAR)?
Do you need help with installing this indicator into MT4 for Windows or Mac OS? Our guide HERE will help you.