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.
Confirmation signals are affected by both the sensitivity and agility settings, increasing these two settings will allow the trader to take decisions regarding longer-term price movements, however, agility is specifically designed to filter out signals occurring during ranging markets, with a higher value removing signals that occurred in ranging markets thus returning more strong signals as a result.
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.
Sensitivity will aim to make contrarian signals spot more significant tops and bottoms, while agility aims to filter out potential false signals without significantly delaying them.
Notice on the above image how sensitivity help removes signals without introducing an excessive delay.
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.