The settings affecting the signal generation algorithm within LuxAlgo Signals & overlays play an important role in using the signals effectively. We give our users the possibility to adjust the settings so that the signals can fit their trading style but we also provide ways to easily adjust settings by using a wide variety of methods.
Each method for adjusting signal settings is designed to fit specific user needs, one method will not necessarily be more accurate than another.
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 signal settings & using other features within our toolkits will likely be the best decision for you rather than trying to find the "holy grail" of optimized signal settings & following the signals alone.
Manual adjustment of signals settings allow the user to fit the signals to their trading style and allows a greater degree of customizability.
Confirmation signals are affected by the Signals Sensitivity setting. Increasing this setting will allow the trader to make decisions for longer-term trends.
Method For Manually Adjusting Confirmation Signals
First, identify which price movements you are looking to trade (regardless of timeframes). Depending on how you are on your charts (on any timeframe) you can adjust the sensitivity value higher or lower to catch the price movements you are looking for. If you are looking for shorter term price movements on those timeframes, you should consider using a lower sensitivity. If you are looking for longer term price movements on those timeframes you should consider using a higher sensitivity.
Contrarian signals are also affected by the Signals Sensitivity setting, increasing it will aim to make contrarian signals spot longer term tops and bottoms.
Automatic Settings Estimation
Autopilot Signal Settings
The downside of adjusting signal settings is that this task needs to be constantly repeated due to ever-changing market conditions. Autopilot is a feature that allows the user to avoid adjusting signal settings completely. Instead, the currently selected signal generation algorithm (Confirmation or Contrarian) adjusts dynamically to the market conditions in order to provide the best signals possible.
This setting can be enabled from the Advanced Settings settings section.
Compared to other automatic methods the "Autopilot" feature is the most user-friendly since it avoids adjusting inputs within the indicator entirely.
The Autopilot Sensitivity advanced setting allows autopilot to adjust to shorter or longer term trends depending on user preference.
Dashboard Optimal Sensitivity
The Optimal Sensitivity is a value displayed on the Lux Dashboard showing the optimal Sensitivity setting when using Confirmation or Contrarian signal modes. This optimization is based on a grid search algorithm and as such will backtest every generated signals using a sensitivity ranging from 10 to 20 over the most recent 250 bars.
This feature works on any ticker & timeframe as long as at least 250 bars of historical data are available.
Choosing The Right Method
While the optimal sensitivity provided by the dashboard is the most precise method since it's performing grid search, there is no "best" method for optimizing signals as it's up to the user to understand their style of trading and the price variations they want to trade (regardless of timeframes).
Do you specifically want to trade shorter-term trends on the timeframes you use?
- Consider using lower sensitivity values such as 5-10
Do you specifically want to trade longer-term trends on the timeframes you use?
- Consider using higher sensitivity values such as 20+
Alternatively, you can use the default of 12 for trading medium-term trends. This provides simple and responsive signals.
Do you rely a lot on optimizing signals and are you ok with updating these manually over time?
- Use the Optimal Sensitivity provided by the dashboard to find more precise signal settings.
Do you completely dislike the process of adjusting signal settings altogether?
- Use the Autopilot sensitivity to allow the signals to adjust dynamically and work without the need of any user interaction.
Using Autopilot or the default settings are overall the simplest user experience as it allows you to completely avoid adjusting settings altogether.