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What indicator doesn't make sense?

What indicator doesn't make sense?

Modern trading platforms allow you to analyze and predict the movements of currency pairs using indicators. The widely used MetaTrader a terminal and TradingView chart in the vfxAlert program contains about 50 such instruments. This number can be increased to theoretical infinity thanks to the built-in programming languages. A large number of indicators on the chart do not solve the problem of how to make money on binary options. Let's see which of them should not be considered immediately as trading assistants.

New "author" indicators continue to fill the Internet.  The demand for the services of programmers, the number of search queries for advisors and scripts does not decrease for obvious reasons:

  • Trading systems using indicators are short-lived. The market changes volatility or the direction of the trend, which leads to a sharp increase in false signals, which can already be corrected by simple optimization of the parameters. We have to change the trading system.
  • The number of algorithmic traders is growing. The development of technology makes it easier to use robots in trading, including for beginners who have the illusion that it is possible to fully automate profit making on Forex or binary options.
  • Development of custom indicators, scripts and advisors is a separate profitable industry. In the latter case, a situation often arises that you are sold a completely non-working indicator. Let's say he got it without money, but the future user will spend time installing, testing and debugging.

There will be a long conversation with the programmer, trying to figure out what the problem is, which will lead to even more loss of time and effort, and maybe even money. The article explains how to save your resources and quickly recognize the uselessness of the proposed indicator.

1. No clear signals

With the advent of indicators, trading has become easier in the sense that the crossings of lines and overbought/oversold levels, changes in the histogram give clear signals and rules for opening a position. This is a significant advantage over graphical analysis, which requires special care when detecting patterns and constructing geometric shapes.

If there are no understandable trading binary signals on CALL / PUT, instead, it simply follows the course - it makes no sense.

The picture shows an indicator that uses, according to the developers, a complex formula for calculating entropy. It is able to determine how predictable the movement of the current candle is.

Results from 0 to 1 suggest that a high value gives 100% accuracy of the forecast. The problem is that the indicator does not indicate exactly how the next 3-4 candles, an hour, a day can end: a downtrend, an uptrend, or a flat.

If the trader does not understand how the signal is implemented on the chart, he will not be able to properly test the instrument, and indirect indicators, in no way affect the profit, can be interesting only from an analytical point of view.

2. Many profitable trades during the testing period

Each indicator author strives to assure the buyer or potential consumer (if the code is distributed free of charge) in the future profitable use of their own tool. 

In the first minutes of viewing or reading the presentation, the trader should see that before him as a maximum-a new "Graal", at least – a useful tool that solves the problem of flat, counter-trend or trend trading. There should be a lot of positive transactions, and somewhere in the side should be mentioned in passing about possible losses.

Pay attention to the live trading signals of any arrow indicator. Everywhere in the figures the prevalence of profitable trades is shown. Each algorithm has vulnerabilities that give a series of losses, but which developer will honestly say about them?

3. HFT (High Frequency Trading) indicators

High-frequency indicators came along with scalping strategies that require traders to have certain skills when trading manually, but they are not always suitable for a binary option strategy.

In the slang of traders, this tactic is called "pipsing". Some brokers immediately prohibit it in the Client Agreement.

Automatic testing of such instruments may not take into account delays in opening / closing deals by a broker, technical failures of the Internet and the binary trading platform, the correctness of quotations and other non-market factors.

4. Indicators without settings

The programmer offers an indicator where the trader can only adjust the colors in the input parameters. In the worst case, this is an API that broadcasts signals from a binary option bot located on a server under the control of a seller or broker.

In the first case, the impossibility of settings will lead to the fact that there will be a period when the algorithm will fail at the next change in the direction of long-term fluctuations of the currency or cryptocurrency market. Nothing can prevent the indicator from losing a trader's deposit at the first launch or after a month of operation. This is unpredictable – after all, the algorithm is unknown how binary option work, which means that it is impossible to predict the failure of the strategy.

Only an online robot can be worse than the above option. In this case, the trader does not even have the opportunity to check the operation of the algorithm on the history. Especially if binary option signals service does not even give brief information about the strategy. Signals can be given by a Martingale, a simple intersection of two Moving Averages, or other simple techniques available in all terminals for free.

The meaning of any indicator and auto binary signals is an idea that a trader must study and understand. Having understood how the signal arises, the user modulates this process for him. From the moment the first exchanges appeared, it became clear that there are no two equally trading traders. Having comprehended the theory, in practice, gradually each of us develops unique indicator settings and tactics of their use.

5. Level indicators

If the indicator only builds support/resistance levels, then it is useless for algorithmic trading, and the effectiveness of these signals cannot be checked in the tester. Such a tool draws, as a rule, not one, but several lines, implying a whole system of rules that make it easier to find the bottom or top of the market.

At the beginning of the article, it was noted that the point of using indicators is to understand their signals. Displaying levels refers more to graphical analysis, where, in addition to resistances and supports, the shape of the candles, their combinations, and the presence of technical patterns are important.

If the trader has the skills of candle analysis, building levels will be one of the mandatory skills, you do not need to buy an indicator for this. It is enough only to use the exact binary option strategy, which analyzes how the candle was formed, how volatility changed, and the volume of open interest on exchanges and other digital indicators of the market. Drawing levels is not the main thing, but it looks nice on the chart, especially if they are drawn automatically.

Let’s summarize

Searching for new indicators and top binary options signals is an important element of successful trading. In order not to be mistaken, choose thematic resources with a good reputation, do not really trust reviews, test thoroughly, and always make your decisions.

Start trading


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