Why arrow indicators alone cannot be consistent trading systems?

This one will sound like bad news to some of you. We’ve almost all been there, let’s admit it. I have. I had my share of looking for the magic arrow where it alone would show me what trades to take and make me rich. I’ve even paid several hundreds of dollars for those (Sigh!).

magic arrow

Ok. Straight to the cut. Let’s see once and for all why arrows cannot possibly be used as a sole indicator.

What is an arrow indicator? Behind that arrow there is a combination of other indicators that when they perform a certain algorithm an arrow is displayed. Example: When Stochastic and RSI 14 go overbought or oversold, and Value Charts level 10 do the same, an arrow displays on the chart. This is the algorithm behind that arrow. Therefore, once you get an arrow indicator, the parameters of the indicators behind the arrow are fixed. Unchangeable. They are coded X,Y, Z.

As you already know or are about to know reading my blog, the market movement changes from period to period and experienced traders always calibrate the parameters of the indicators they use to function optimally with the new logic of price (how it moves through the charts). And that arrow, my friend, becomes obsolete. So even if the sales person shows screenshots and videos of success in the past, it doesn’t mean it will be effective in the future. That is the reason why some systems and indicators lose their effectiveness after some time. In a nutshell: The market behaviour changed and those indicators were setup to work with the former logic of price action. So unless you are an extremely experienced trader, a MQL4 coder or work with a system that will not need constant “calibration”, you are likely to be in a rat race of trading systems with expiration dates.

 

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