Repainting indicators - is it always bad thing?

Almost every newbie is sure that somewhere in the secret sections of thematic Forex forums there are grail-indicators that give extremely profitable signals. Those who are looking - will always find, and indeed, over time, they find expert advisors or scripts that show exceptional results on the chart.

Often such amazing results are the result of the so-called “repainting” of indicators. It is about her that we will talk in today’s material. The article will describe in detail what repainting of indicators is, how and why it occurs, is it always bad thing, and we will also consider some ways to protect against repainting.

Finding themselves in a similar situation, trading professionals monitoring the forums space for new ideas will immediately ask a question about repainting. This is the name of the property of an indicator to change its readings in the past as new candles appear.

Changes in the past provide a beautiful picture of 100% correct trades on the chart. But in real trading, repainting all signals of the Forex indicator will lead to a loss, ensuring the drain of the newbie’s deposit, who has not checked the purchased or downloaded indicator for free.

What is an indicator repainting and what does it look like?

The picture below shows an indicator, changing the color of the histogram of which gives a signal to enter. On the left, you can see how the bounce gave several green bars - a confident Buy. As time passed, the green zone disappeared, changing to red - a complete repainting of the signal took place.

Lost money gives a novice trader a “strong immunity” to any kind of repainting, and having reached professional heights, he unconditionally closes the topic of such indicators for himself.

But is the situation so critical when the signal changes in the past, if the trader knows about it? Are there any trading systems with Forex indicators in which repainting allows you to make a profit?

Why do Forex indicators repaint signals?

The technical indicators are based on the formula, which in the classical version calculates the signal at the interval specified by the settings - the historical period. The starting point is usually located at the current closed candlestick, the final one is N bars in the past - this algorithm guarantees the invariability of the calculated value.

A simple example is a moving average with a period of 10. As soon as the candlestick closes, its price will be added to the previous 9 values of the same and will be divided by 10. The trader will receive a point and a line that will not change in history, since it is no longer possible to change quotes in the past, participating in the calculations.

The situation is completely different in the TMA triangular moving average formula. The indicator formula gives the main weight to the averages, and not to the price values in the past period, changing the pattern of the channel formed by the indicator curves with a strong jump in the volatility of the current candles.

In the Williams fractal formula, defining the highest high or low in a five-candlestick formation with arrows, the situation is about the same. The fractal falls on the third, middle candlestick, the signal of which can be redrawn after the current quote closes if it updates the minimum or maximum of the five-bar pattern.

The most striking and outrageous example of repainting for beginners is the ZigZag indicator, which is an ideal picture of the grail when plotted on a chart. The accuracy of “guessing” tops and bottoms is colossal if you do not know that the indicator changes the already displayed last top or bottom as new candles are added to the chart.

The chart shows how the indicator “release” the price several candles ahead, their minimum number is determined by the Backstep setting - the maximum number that is virtually unlimited in a strong trend. ZigZag necessarily takes into account new candles when forming tops and bottoms: if they exceed the previous extremes by the percentage specified by the Deviation settings, then the indicator curve will be rebuilt.

The given example clearly shows the absence of “malicious intent” of repainting - it is embedded in the formulas and is visible in advance to any trader who can read. ZigZag and Fractals are included in the standard Metatrader 4 and 5 package, they are intended only to optimize the search for chart formations.

Fractals are used to build support and resistance lines, which provide for the simultaneous use of many signals “from the past”, and Zigzag lines help to build various Wolfe waves, Gartley patterns, etc., where the role of repainting the last top or bottom is not so important.

Thus, repainting - is normal for indicators with calculation features, as in the examples above. And in this case, there is no malicious intent in the repainting, it is just worth knowing and taking into account about it.

Forex indicators without repainting don’t make sense?

As shown above, indicators with repainting are included in the standard package of trading terminals on an equal basis with other technical analysis tools. The authors specially created their formulas and views for certain strategies.

In particular, fractals brought fortune to Bill Williams in the Profitunity strategy, ZigZag serves as the basis for many profitable wave strategies and graphic patterns. An attempt to fix the code by removing repainting will change the rules and tactics, without which the trading system will lose its meaning.

Another reason not to cancel the inherent repainting is the absence of strategies that use the current signals of such indicators. The only exception is John Ehlers’ histogram, which uses Fisher’s mathematical transformation.

The complex mathematical formula implemented in the Fisher indicator, describing with high accuracy the Forex currency cycles, is very sensitive to the last closed candles.

Ehlers proposes to deal with signal changes using the three-screen method, where a change in values on a lower timeframe will not be significant for a medium-term and long-term trend.

To summarize, we can characterize repainting as an attempt by the author to achieve an advanced signal. Internet versions that offer the code without repainting will lead to a lag or fixation of the readings, which will not be able to warn the trader about a change in the market situation.

If the modified indicators without repainting are used in the author’s strategies, then the immutable signals will distort the patterns built on the basis of them, which will lead to an increase in the signal error.

Repainting indicators - it is deception of traders?

Reapinting of indicators, which is not related to the peculiarity of the strategy or the operation of the indicator in the advanced signal mode, has two reasons: unprofessionalism or deception.

The first is a trivial error of the encoder, which leads to recalculation of the values of the formula at each new candlestick and changes all signals. There are many specific reasons for this, in this case we are not talking about intent, but the trader will lose the deposit in the same way if he entrusts the creation of the advisor to such a “professional”, as in the case of deception and repainting.

It is specially introduced into the code: the built-in function of returning values ”peeps into the future”, changing signals in the past to show the ideal picture of trades. Fraudsters sometimes only need screenshots of transactions and fake test results to sell a broken indicator.

Here is an example of the “Holy Grail”, which in real trading will lead to losses:

A simple way to protect against reapinting of indicators

A trader cannot suffer from Forex indicators, the repainting of which is deliberately included in the algorithm, if he observes the axioms of trading:

Understand the principles of the trading system.

When downloading the found indicator or purchasing a trading system, understand thoroughly the algorithm of signal generation. No matter how complex the code is used to write the script, it will still not go beyond the fairly simple mathematical apparatus of the Metatrader 4 platform. This means that to understand the “stuffing”, simple knowledge of high school is enough.

Repainting is possible if the system uses the fractal method for the signal - comparing two small periods from several candles. It is necessary to track the segments on the chart at the moments of the trend reversal - there should be a losing signal;

Check the operation of the trading system on a demo account, visually tracking signals and trades.

An expert advisor or indicator can be quickly tested in the strategy tester built into Metatrader. Use the visualization window to track and make sure signals are immutable or repaint;

Never buy anything.

Well, seriously, you still won’t buy the grail, but there are a lot of good indicators on the net for free.

Conclusion

In the Forex market, it is difficult to find strategies that are based solely on one technical analysis tool. The trading system must combine several rules or combine charting patterns with line indicators. In this case, the trader is a priori protected from repainting or can use it to confirm lagging signals.

Expert Advisors can include several instruments at once, giving the result of their analysis. Such systems should not produce repainting, which would make the trading result unpredictable. In this case, we are talking about fraud or a code error.

Therefore, repainting indicators is neither bad nor good, but just a technical feature that should be known and taken into account when interpreting signals and analyzing indicator readings on history.

Take care, Michael

Forextraderportal.com

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