Indicators Without Signals
Today’s indicators have greatly simplified the work of a trader. Instead of scrupulously studying charts in search of candlestick patterns or emerging patterns, it is enough to use a program that will give a clear buy or sell signal:
- Crossing of certain lines on the chart (overbought or oversold levels)
- Changes in histograms, etc.
If you have an indicator that simply follows the chart and doesn’t give clear buy/sell signals, then such a program is useless. Before purchasing a product, make sure you understand how the indicator generates those signals. Without that, you won't be able to test the program nor make real profits.
Price Level Indicators
There are programs whose only task is to draw price levels. Yes, such indicators look amazing on the chart as they are able to draw several lines at once and can simplify the search for highs and lows. But is it truly useful?
We have already covered the importance of trading signals. The price level is not a signal itself. Candlestick patterns, breakout of these price levels, and a number of other indicators serve as signals to open a trade.
Of course, for technical analysis, building support and resistance levels is a mandatory minimum. However, if you have mastered at least basic knowledge of trading, then you are able to draw these lines without the help of an indicator. There is no reason to spend money on a program that will do it for you.
High-Frequency Indicators
These are indicators that assist in scalping trading. I’m not suggesting that these programs are not worth your attention. However, due to their specificity, these indicators require special care and preparation.
Pay attention to the following factors:
- Many brokers prohibit these strategies on most of their accounts. So if you don’t plan to trade on special account types, you may not need the indicator.
- These strategies are also not suitable for fixed spread accounts due to the high trading costs. The best option would be an account with zero spread and the lowest possible commission.
- Testing such an indicator will not give you a complete picture, since it doesn’t take into account the presence of requotes, non-market quotes, and possible malfunctions in the terminal or connection. In real trading, the result may differ significantly from the test one.
- It is better to use such strategies only with a low level of requotes and a high order execution speed. Make sure your broker provides the required terms.
- To optimize the high-frequency indicator, you will also need a VPS and a trading robot. If you plan to trade manually, you might not be able to timely respond to the indicator’s signals.
Final Words
Let me remind you that my words are not a call to action and you may have your own view of the work of certain indicators. However, before you spend money on them, make sure that you take into account all the nuances from these articles. Good luck!