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, the confirmation signals and the contrarian signals. The following subsections describe these two methodologies in detail.
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 signal that are in accordance with the currently estimated trend, while normal signals can be caused by a retracement.
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.
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, if you select Contrarian then contrarian signals will be displayed instead of confirmation signals when Both is selected both confirmation and contrarian signals will be displayed, however contrarian signals will appear in blue while confirmation signals will conserve their green/red color.
None will not display any signal on the chart.