Before you reach for your paint brushes and easel, let’s put repainting indicators into the world of foreign exchange trading. Perhaps the most common questions a trader asks is – what should I trade, when should I enter the market and when should I exit? The way in which they make informed trading decisions in forex is by using technical and fundamental indicators to check for trends and patterns. However, there are some technical indicators that can be misleading. This is, to a large extent, due to the fact that the world consists of unscrupulous people, trying to make a quick buck by scamming others, especially in the virtual world. However, we aren’t here to give scammers a lesson in fair play. We want to tell you how you can watch out for fraudulent indicators and keep your trading decisions safe from cybercrime.
The problem with repainting indicators is that they constantly change their values, using future data, rather than real-time numbers, to indicate values and entry signals. By doing so, these fraudulent indicators make their historical entry and exit signal appear flawless and accurate. On the other hand, a non-repainting indicator will not change its values once the price bar has been closed, using the price bars on the left (while repainting indicators use the bars on the right) to calculate values. Once a bar is closed, its open, close, low and high levels will not change. Therefore, neither should the values of the indicators based on such bars.
So, what the repainting indicator does is use information of “historical future” and then “predict” the way the market was likely to go. This is why they usually begin with the bars on the left of the chart, moving on to the right side of the chart to gather enough knowledge to base a decision on. This results in the indicator constantly recalculating its values, giving false signals.
The important thing to remember is that not all repainting indicators are out there to fool you. There are both good and bad ones. For instance, fractals or zigzag indicators are not meant to trick traders or mislead them in any way. It is up to the trader to identify patterns, which will change along with price changes. So, the key is to be able to tell the difference between good and bad repainting indicators and use the good ones to your advantage.
The only way to remain safe, in life and in forex, is to cautious. So, check whether the developer has mentioned that the indicator repaints. If it is not clarified, and the indicator is repainting, the risk of it being a bad indicator are high. You can also keep a lookout to see if the indicator fires entry signals that disappear later when the price movement changes directions. This is a clear sign that the indicator cannot be trusted. Entry signals, once on your chart, should not disappear at all. They are meant to remain on the chart, not only for you to check patterns but also to assess the reliability of the tool. A disappearing signal is a sure sign of a false signal.
Here are some steps you can take to verify whether the indicator is a bad repainting one:
Non-repainting indicators will have values that remain unchanged after the price bar closes, while a repainting indicator will have values that change even on closed price bars, as well as disappearing signals.
If you have identified a repainting indicator, you can stop it from repainting by reprogramming it. What you should know is that while reprogramming might seem simple and require you to change only a few lines of code, there could be times when the indicator itself is complex, making the job of reprogramming difficult. If you can reprogram the indicator to not use the bars on the right, the indicator will stop repainting.
The bottom line is that technical indicators are crucial for informed trading decisions. So, don’t stop using them for fear of repainting. Learn to identify and eliminate false signals and keep your trading safe.
If you liked this educational article please consult our Risk Disclosure Notice before starting to trade. Trading leveraged products involves a high level of risk. You may lose more than your invested capital.