Modern indicators enable a trader to analyze the market using different techniques. But most of them have the same drawback – their readings are quite difficult to analyze in a short time. Also, some indicators redraw, so a signal to buy can get immediately replaced by a signal to open a short position.
Arrow Forex indicator lacks these shortcomings. Indicators of this type are the most adapted to making the deals, and the trader won’t even have to spend time on analyzing the situation. Direction of entry into the market will be shown by an arrow drawn by the indicator.
In addition, the arrow Forex indicator does not redraw, so you can be sure in the received signal. Outward simplicity does not mean that the indicator analyzes the behavior of the price superficially – on the contrary, the seeming simplicity can hide a complex algorithm. However, here lies the main drawback of this type of indicators.
Arrow Forex indicator: an example of operation
You can find plenty of freely available arrow indicators out there. Of course, each of them uses its own algorithm, but a visual picture doesn’t differ much: the arrows are automatically drawn on the chart, indicating the direction of entry into the market.
T3MA Alarm indicator was used as an example. It is based on a smoothed moving average: an arrow pointing to the potential deal appears after the chart crosses the moving average. If the crossing is upwards, this is a signal to buy, if downwards – to open a short position.
For the convenience of the trader, the smoothed moving average is not displayed on the chart. When working with this indicator, the trader will only need to wait for the completion of the signal candle forming (the one over which the arrow is formed) and make a deal in the direction of the arrow. SL should be placed at the level either under/over the minimum of the signal candle, or under/over the nearest extreme.
Arrow Forex indicator does not display target levels, so you can use a trailing stop to protect your profit. It is recommended to exit the deal after the formation of the opposite signal. Such indicators can be considered a self-sufficient trading system, as their signals are enough for trading.
Arrow Forex indicator: major shortcomings
The main disadvantage of arrow indicators is that the trader often has no idea of which algorithm is used to generate signals. This is a kind of a fee for convenience and simplicity. Trader gets a crisp and clear signal to enter the market, but often does not understand how that signal was received.
As a result, arrow indicators should not be used without a number of confirmation signals. It is also undesirable to use too small timeframes (less than h1), as in this case too many signals would be generated, while the potential profit will be too small.
Additional signals can include the readings of other indicators, graphical representations, Fibonacci retracement levels, candlestick combinations, graphic patterns. Their use in combination with the arrow indicators significantly increase the probability of working out of the received signal.Social button for Joomla