Forex Profitable Indicator, Deskripsi Indikator

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What is the Most Profitable Forex Indicator?

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This article will review profitable Forex indicators, to assess which indicator is the most profitable for professional traders. Find out how to find profitable Forex indicators by backtesting, learn about why you should consider using the Ichimoku Kinko Hyo indicator, and more!

Getting involved in the financial markets has never been easier than it is today. Prices are quicker, and more readily available than ever before, but the trading of bonds, stocks and foreign exchange is far from new. The history of the financial markets is a long one. Over the course of this history, many indicators have been developed to try and analyse what is transpiring in the market; and predict what may happen next.

The internet and other advances in computing technology have shaken things up considerably. Moreover, trading platforms have become quite robust, in order to maximise efficiency for traders. This has opened up the world of indicators in a revolutionary way, to a whole new breed of investor. Nowadays, traders can measure various market metrics; and can even program their own indicators.

The search for the most profitable Forex indicator has led to the creation of numerous ways to gauge market behaviour. With so many different indicators, you may ask yourself: Which is the most profitable Forex indicator? This article will discuss why this is such a difficult question to answer, and why we might want to consider ‘suitability’ as much as profitability.

Finding Profitable Forex Indicators Through Backtesting

Source: MetaTrader 4 Supreme Edition – EURUSD Hourly Chart – Data Range: 20 Mar, 2020 – 4 May, 2020 – Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.

Historical simulation (aka backtesting) cannot tell us how an indicator will perform going forward. After all, the future is uncertain, right? But backtesting can help us to estimate what is more likely to happen, based on the market’s past behaviour. For example, MetaTrader 4 Supreme Edition offers a strategy testing feature for this exact purpose.

Most indicators use parameters. These are variable inputs that govern the signals outputted by the indicator. We can backtest to find the optimal parameters for a given indicator. However, some traders don’t like to optimise against historical prices, because they fear the risk of distorted results. This is known as a fear of overfitting.

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What is Overfitting?

Overfitting is a phenomenon whereby chosen parameters are suited perfectly for the period that is tested, yet are ineffective for predicting future market conditions. A surefire sign of an overfitted system is that it will hugely underperform when you start using a Forex trading indicator in the real markets. This is because the results are specifically tweaked to fit the test data. The wider your sample data for backtesting, the more valid the optimisation will be, and the less likely it is be overfitted.

We have to be careful when optimising. Even systems that are not overfitted will likely yield worse results, compared with what backtesting results suggest. So why does actual trading underperform in comparison to the results of backtesting? Firstly, backtesting provides a perfect look at the past, but only an imperfect estimate of the future.

When we select an indicator, we choose it based on its past performance. This suggests that it may be a good guide in the future, but the future will never mirror previous conditions completely. Performance can vary by a surprisingly large amount—purely by random. Results over the course of five or even ten years cannot hope to fully encompass possible market conditions.

Source: Admiral Markets Supreme Edition – Brent Daily Chart – Data Range: 8 Apr, 2020 – 5, Apr, 2020 – Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.

But wait—it gets worse. When we have identified a profitable system via testing, it may not remain profitable forever. This is because the more traders that follow one system, the less likely that particular system is to perform as well in the future. If an indicator has performed very well in the past, there’s a good chance that market participants will have noticed. As a result, more traders will start utilising the strategy.

This is known as the ‘adaptive markets hypothesis’. This theory was proposed by Andrew Lo, a professor at MIT’s Sloan School of Management. It suggests that arbitrage action will slowly erode repeating patterns as they become recognised. The implication of this theory is that as conditions change, we might find a different indicator that performs better. So we struggle to attain a definitive answer regarding the most profitable Forex indicator question.

Here’s another problem in providing that answer. It is difficult to find a ‘one-size-fits-all’ solution when different people may want to trade over different time frames. One indicator may be better for long-term trading, and another may be better for short term trading. A trader will choose the indicator that best suits their purpose or trading style.

Additionally, the blunt measure of profit ignores other key characteristics that may affect an indicator’s viability. One key factor that you must consider is maximum drawdown. Drawdown is a term used in finance to measure the decline of an investment. We can define it as the losing period that a trading system will encounter, with reference to both the duration and the magnitude of loss.

Source: Admiral Markets Supreme Edition – Brent Daily Chart – Data Range: 8 Apr, 2020 – 5, Apr, 2020 – Please Note: Past performance does not indicate future results, nor is it a reliable indicator of future performance.

It is desirable to have as low drawdown as possible. This is because it is psychologically difficult to withstand large losses. If your trading capital has declined substantially, you will inevitably start to question yourself. There is a risk that you will abandon a winning system. This demonstrates that the magnitude of theoretical returns isn’t everything.

A more profitable system, with a large maximum drawdown, may in practice only be suitable for a confident and experienced trader, who is better able to tolerate a large decline in trading capital. A risk-conscious newbie, on the other hand, will likely bail. For such a trader, it may be more prudent to tweak their system, to reduce risk. The benefit of reducing potential drawdowns will be at the cost of reduced profit.

Judging the profitability of an indicator in isolation is complicated by this fact. Many traders use a combination of tools, rather than just one single profitable Forex indicator. An indicator cannot automatically provide you with many key components of a trading system. For example, an indicator does not:

  • Tell you what size to trade
  • Tell you what size loss is acceptable before cutting a trade
  • Manage how many trades you can have open at once

Instead, an indicator simply clues you in to the fact that a familiar pattern may be forming. An indicator with a good hit rate of providing correct signals can be a starting point. It can be used as a component when building a trading system. Many trading systems use a combination of indicators, filters, and money management techniques to create rules for entry and exit points.

Now that we’ve outlined why it is difficult to judge the profitability of an indicator, let’s take a look at an indicator that is more versatile than most. Namely, the Ichimoku Kinko Hyo indicator, which according to numerous successful traders, has been able to produce impressive results.

Ichimoku Kinko Hyo

Source: Admiral Markets Supreme Edition – Customer Indicator Selection – Ichimoku Kinko Hyo

In fact, the Ichimoku Kinko Hyo is not just an indicator, it is more like a system. Specifically, it’s a candle-based, trend-following system. It is unusual because it forecasts future levels of support and resistance, instead of only gauging momentum. This feature beats the inherent lagging issue that other momentum indicators suffer. Want to know the best part?

It does it all on one single-glance, equilibrium chart. Plotting several indicators on one chart allows you to see whether a market is in or out of equilibrium. Equilibrium is the balance between supply and demand (i.e. the two primary forces moving the market). Hence, Ichimoku is more self-contained than most indicators.

How Does Ichimoku Work?

Ichimoku consists of five lines on one chart.

  • Tenkan-sen is calculated by summing the highest high and the lowest low; then dividing by two, and then averaging over the last nine periods.
  • Kinjun-sen is calculated in similar fashion to the Tenkan-sen, but over the last 22 periods.
  • Leading (senkou) span A is calculated as the sum of the Tenkan-sen plus the Kinjun-sen, plotted 26 periods ahead.
  • Leading (senkou) span B is calculated in similar fashion to Tenkan-sen, but over the last 52 periods, and plotted 26 periods ahead.
  • Lagging span (chikou) plots the current closing price, 26 periods back.

The first two lines operate in a similar way to a moving average crossover. When the Tenkan-sen crosses below the Kinjun-sen, it indicates that shorter-term prices are lower than the long-term trend. This suggests a downtrend. When the Tenkan-sen crosses above the Kinjun-sen, it suggests an uptrend. The area between span A and span B is known as the ‘kumo’ or cloud. The kumo represents a band of support or resistance. To initiate a trade, you are looking for a clear break through the cloud. The lagging span or chikou line acts as a filter. It suggests an overall market sentiment, and effectively compares the current and past prices.

If the chikou is holding above the price candles on the chart, it suggests an overall bullish sentiment. If it holds below, it suggests an overall bearish sentiment. You should only initiate a trade if the sentiment agrees with the direction of the trade that is suggested by the crossover signal. So you can see, Ichimoku is like several indicators in one—and it comes with its own filter system.

If you think that it’s an indicator that might suit you, why not try conducting your own trials to determine its effectiveness? As with any indicator, it’s better to find out first-hand what works for you rather than taking someone else’s word for it. Admiral Markets’ demo trading account is a perfect training ground for determining the indicator’s effectiveness in a risk-free trading environment.

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About Admiral Markets
Admiral Markets is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world’s most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

What is the Best Technical Indicator in Forex?

Now on to the good stuff: Just how profitable is each technical indicator on its own?

After all, forex traders don’t include these technical indicators just to make their charts look nicer. Traders are in the business of making money!

In order to give y’all a comparison of the effectiveness of each technical indicator, we’ve decided to backtest each of the indicators on their own for the past 5 years.

Backtesting involves retroactively testing the parameters of the indicators against historical price action.

Indicator Parameters Rules
Bollinger Bands (30,2,2) Cover and go long when daily closing price crosses below the lower band. Cover and go short when daily closing price crosses above the upper band.
MACD (12,26,9) Cover and go long when MACD1 (fast) crosses above MACD2 (slow). Cover and go short when MACD1 crosses below MACD2.
Parabolic SAR (.02,.02,.2) Cover and go long when daily closing price crosses above ParSAR. Cover and go short when daily closing price crosses below ParSAR.
Stochastic (14,3,3) Cover and go long when Stoch % crosses above 20. Cover and go short when Stoch % crosses below 80.
RSI (9) Cover and go long when RSI crosses above 30. Cover and go short when RSI crosses below 70
Ichimoku Kinko Hyo (9,26,52,1) Cover and go long when conversion line crosses above baseline. Cover and go short when conversion line crosses below base line

Using these parameters, we tested each of the technical indicators on its own on the daily time frame of EUR/USD over the past 5 years.

We are trading 1 lot (that’s 100,000 units) at a time with no set stop losses or take profit points.

Also, we were assuming we were well capitalized (as suggested in our Leverage lesson) and started with a hypothetical balance of $100,000.

Aside from the actual profit and loss of each strategy, we included total pips gained/lost and the max drawdown.

Again, let us just remind you that we DO NOT SUGGEST trading forex without any stop losses. This is just for illustrative purposes only! Moving on, here are the results of our backtest:

Strategy Number of Trades P/L in Pips P/L in % Max Drawdown
Buy And Hold 1 -3,416.66 -3.42 25.44
Bollinger Bands 20 -19,535.97 -19.54 37.99
MACD 110 3,937.67 3.94 27.55
Parabolic SAR 128 -9,746.29 -9.75 21.96
Stochastic 74 -20,716.40 -20.72 30.64
RSI 8 -18,716.69 -18.72 34.57
Ichimoku Kinko Hyo 53 30,341.22 30.34 19.51

The data showed that over the past 5-years, the indicator that performed the best on its own was the Ichimoku Kinko Hyo indicator.

Surprisingly, the rest of the technical indicators were a lot less profitable, with the Stochastic indicator showing a return of negative 20.72%.

Furthermore, all of the indicators led to substantial drawdowns of between 20% to 30%.

However, this does not mean that the Ichimoku Kinko Hyo indicator is the best or that technical indicators as a whole are useless. Rather, this just goes to show that they aren’t that useful on their own.

Think of all those martial arts movies you watched growing up. Aside from The Rock and the People’s Elbow, no one relied on just one move to beat all the bad guys. The Rock used a combination of moves to get the job done.

Forex trading is similar. It is an art and as traders, we need to learn how to use and combine the tools at hand in order to come up with a system that works for us. This brings us to our next lesson: putting all these indicators together!

Which FOREX Indicator Is Most Profitable? (5-10X More Profit)

Forex market is the market consists of huge risk. It consists of many risks that most of the trader fails. It is estimated that around 96% of traders lose money in this market and end up quitting. What is the reason behind most people fail in this market? There are two main reasons, why traders fail in the foreign exchange market:

  1. Lack of knowledge and trading strategy
  2. Loses due to the broker

A new trader is unaware of forex market strategies and trading techniques, he also doesn’t know whether he should trade on public holidays or not. It is not advisable to trade on public holidays because it is the time when the liquidity and volatility are very low. Forex traders need to find those indicators which are most profitable and can help in maximizing their profit.

So, which forex indicator most profitable? Technical indicators are divided based on the purpose. Moving Average forex indicator is one of the best technical indicators to identify and follow the trend. While there are many other technical indicators which help a trader in making the trading strategy. They are Bollinger Bands and MACD which are old paradigm trading. The most profitable happens to be in the New Paradigm using real time indicators that include TAB29 created by Steve Gregor.

OLD PARADIGM VS NEW PARADIGM

Forex indicators are very effective in forecasting the fluctuating price. But here the main thing is which indicator you are using, an ineffective indicator may lead to huge losses. Hence, it is better to find a perfect indicator. The result of an indicator helps in estimating the price.

A new trader should learn daily about this market and keep learning because foreign exchange market has the wide concept. To become a successful trader, it is necessary to learn technical analysis and technical indicators are a big part of technical analysis. Mainly there are two types of forex analysis: Fundamental analysis and Technical analysis.

Fundamental analysis is the market analysis in which a trader needs to pay attention to fundamental factors like, GDP, Inflation, manufacturing or production, economic growth etc. Technical analysis consists of many methods or indicators which can help in estimating the future price.

Table of Contents

Technical Analysis

Technical analysis is effective in the estimation of future price movements in the forex market. This estimation of future prices is done after analyzing the data of past market and on the basis of the data collected, forex market forecast is done.

When a trader identifies a repetitive pattern of the market price in the past data, the forecasts based on it. A trader can rely on price charts, volume charts and other mathematical representation of market data to discover an ideal entry and exit point.

Technical analysis includes technical indicators. Technical indicators are a big part of it. To forecast the prices effectively through various methods or indicators of technical analysis, it is also important to select an ideal and profitable technical indicator for the same.

Profitable Indicators for Forex Traders

In technical analysis, there are many indicators, but the effective trader selects the best and profitable indicator for the estimation of price movements. Here are some profitable indicators for forex traders:

1. TAB29 (Tops and Bottoms Indicator using 29 indicators all in one)

I am a little bias here of course with this one because it is my main indicator I use in all trading and is created by Steve Gregor.

This indicator can be used to for precise reversals where you can use down to a 3 pip stop loss. This essentially means the potential to have 5X-10X more profit per trade. If you would like to read more on this and the new paradigm you can go to our New Paradigm page and see how to get invited to Steve Gregor’s free facebook group on Trading Scans, Forks, Fibos and Waveology.

Traders can also use this indicator for trend continuation trades that are very easy trades once you get your Volume Of Traders in by demoing.

Harmonic Wave Convergence indicated in TAB29 Indicators is the occurrence of 2 or more levels of cyclical waves (“harmonic”) exhausting (terminating) at precisely the same time and price. When this convergence takes place, price will almost always reverse” – Steve Gregor

As stated previously with this indicator you have the ability to use a 3-10 pip stop loss compared to a 30-60 pip stop loss in old paradigm trading (I still do trade old paradigm as well). So for both these stop losses you should be using around a 1-3% risk meaning that with a 10 pip stop loss you are gaining 1-3% per 10 pips where with the 60 pip stop loss you are gaining 1-3% every 60 pips. This equates to roughly 6 times more profit using this indicator.

Pros of TAB29

  • Great for confirmation of reversal zone
  • Can provide multiple entries after a reversal
  • Gets you in profit quickly and also prevents losses once in profit
  • Cuts down time on the charts greatly

Cons of TAB29

  • TAB29 can be traded stand alone but it is not meant for that purpose you should use extra confirmations such as: Fib Channel, Fib Retracement, Harmonic Patterns, Pitchforks, Trendlines, etc.
  • Is not just a plug and play strategy there is a lot to learn and demoing is a must to learn what not to do
  • Need to be on the charts to trade this isn’t a this indicator says buy lets by and head for the beach but you are in and out of trades quickly

2. Moving Average

Moving Average indicator is one of the best and profitable technical indicators a trader should use. Moving Average is a trend indicator, helps you in identifying and following the trend. It shows an average value of price chosen over a time period.

In simple terms, MA follows the forex market price. The indicator helps in lining the smooth volatility and avoiding unwanted price noise. Moving Average indicator helps in outlining the current direction of the market and not predicting the future forex market price. Mainly, there are four types of Moving Averages – exponential, linear weighted, simple and smooth. The differentiation among them is merely technical.

So, Moving Average (MA) shows whether to buy a currency pair or sell it. But, it won’t tell at what level to open your trade, for that you need other technical indicators.

Pros of Moving Average

  • It finds trends reversals
  • It shows resistance levels and potential support
  • It helps in identifying the direction of a trend.

Cons of Moving Average

  • Moving Average lags behind the present price.

3. Bollinger Bands

Bollinger Bands is an indicator to measure market volatility. This indicator is helpful in a sideways market. Bollinger Bands consist of three lines. Each line or band is a Moving Average. The middle band or line helps in identifying trend direction which is 20-period SMA. Out of three bands, upper and lower bands are shifted by 2 standard deviations above the middle line/band and below the middle line/band.

Bollinger Bands indicator is effective when the market is not trending and this indicator alone is not enough, a trader should also use other indicators to get the most from this method.

Hence, the Bollinger band is an indicator which puts the price in a type of box between two outside bands. The market price constantly revolves around the middle line, only for a short period of time.

Pros of Bollinger Bands

  • The Bollinger Bands indicator is very effective in a sideways market when the currency pair is trading in its range area.

Cons of Bollinger Bands

  • When there is a strong trend in the market, the price can spend a long time at only one Bollinger band and does not go to the opposite ones. As a result, it is ineffective in some ways.

4. Moving Average Convergence/Divergence (MACD)

This indicator measures the driving force behind the market. It helps in showing when the market is tired of moving into one direction. Moving Average Convergence/Divergence (MACD) is the indicator based on the Moving Average method. It belongs to a kind of technical indicator which is known as oscillators. Oscillators are shown separately in a box when the oscillators rise to its high level; it has to fall down back.

Moving Average Convergence/Divergence indicator is effective in the measurement of the market trend and momentum. So, it is very important to have MACD on the chart. This indicator could be a strong part of your trading systems and strategies. Although, many traders do not recommend to make a trading decision based on this indicator because, it lags behind the price chart.

Pros of MACD

  • It can be used for both ranging markets and trending markets.
  • It becomes easy for you to learn oscillators when you understand MACD.

Cons of MACD

  • The MACD indicator lags behind the price chart.
  • As some signals come late, they are not followed by the strong move of the market.

Conclusion

So mainly, there are two types of forex analysis are- Technical analysis and Fundamental analysis. Fundamental analysis is the market analysis in which the trader pays attention to fundamental factors of the market like, manufacturing or production, economic growth, GDP etc. While in technical analysis, there are many technical indicators included.

A trader should find the technical indicator which is effective and which can be most profitable indicator for him. Technical indicators are based on the purpose. For example, the Moving Average indicator is the best to identify and follow the trend. The MACD indicator is the best driving force behind the market and Bollinger Bands indicator is the ideal forex indicator for the measurement of volatility.

So, good technical indicators are very useful in getting the trading signal. You can follow above-mentioned indicators to get a good forex trading signal. If you are ready to make 5-10X the amount per pip I suggest you get in contact with me so I can get you into Steve Gregors free group and on your way to success.

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