Forex Analysis Models - Fourier Transform Model

In Forex trading, the fast Fourier transform is another popular method among technical analysts for extracting cycles from a time series. The basic assumption is that any (well-behaved) curve can be approximated as the sum of a finite number of sinusoidals and is based on the following Fourier series:

Yx = A0 /2 + ΣAn cos(nπx /L)+ ΣBn sin(nπx /L)

The transform operations calculate the values for the cosine amplitudes A and the sine amplitudes B in a similar fashion to the simple trigonometric regression above. Most analysts prefer to download an Internet utility to handle the complexities rather than code it themselves.