Type Of Signals
The Lux Algo Premium Indicator displays buy/sell signals that aim to support the analysis of the trader. There are two main signal methodologies available, each one fitting a different trading style, confirmation signals, and contrarian signals. The following subsections describe these two methodologies in detail.
It's critical to understand Confirmation Signals are generally meant to be used as trend confirmations, not direct entries & exits. Focusing on ease of use with the signals & using other features within our toolkit alongside them will likely be the best decision for you rather than using these signals alone.
Confirmation signals are signals based on a trend following methodology. As the name suggests, they aim to confirm any potential action a trader might take and are more effective when used in confluence with other indicators.
There exist two types of confirmation signals, normal signals, and strong signals. Strong signals are signals that are in accordance with the current estimated trend, while normal signals can be caused by a retracement.
The confirmation signal mode includes exit signals (represented by colored crosses). An exit buy signal is displayed as a blue cross, while an exit sell is displayed as an orange cross.
These exits signals aim to exit a position based on a previous confirmation signal at the highest price possible. Also, note that such exits would always exit a previous confirmation signal on a win.
Successive exit signals can occur during longer-term trends, as such the user can do partial exits instead of exiting an entire position.
Contrarian signals go in opposition to the current market sentiment, aiming to deliver extremely fast decision timing, more simply put, contrarian signals aim to spot potential tops and bottoms.
The advantage of contrarian methodologies is that they are less subject to lag than most trend-following methodologies, thus allowing for potentially higher profits. However, it must be noted that going against the trend exposes the trader to larger price variations, which means potentially higher losses.
Like the confirmation signals, contrarian signals can also be strong, these occur when the price is excessively overbought or oversold, and have more chances of indicating a potential retracement.
Extra confirmation such as declining volume or the occurrence of the signal near a significant support/resistance can be useful to tell when a signal is indicative of a reversal.
You can also use the contrarian signals more safely by exiting a position rather than opening them when a signal occurs.
It is possible to choose what type of signals you want to display as well as displaying both or no signals at all, this is done from the settings panel in the signal mode drop-down menu.
By default Confirmation is selected. None will not display any signal on the chart.
Signals are confirmed at the opening of the next candle, if you see a signal displayed on the most recent candle remember that it might be subject to change.