What is the best trading indicator of the day? – Overview of change theory ratios and why they work!

As a new or experienced trader, you are likely to look for a statistical advantage that gives you an advantage when trading markets. There are hundreds of indicators on the market, but the truth is that only a couple of indicators really work. Almost all indicators fail when it comes to testing and analyzing price data in real time. Obviously, this is something few people are willing to talk about because just a few months ago there were no alternatives.

Most indicators just don’t work because of the way they are designed. There are two problems that most technical analysis techniques have today:

  1. Signal noise

  2. Delays or delay of the signal

Signal noise is one of the most important problems with most indicators. The reason is that they are mainly based on the closing price. The closing price changes each time a symbol has a rising or falling mark. As an example of how noisy is an indicator like the moving average or the RSI. If you grab a 60-minute bar at an actively traded symbol, you can easily have a couple of thousands of fake signals on a single bar. This is an important problem that technical analysis must overcome.

Signal delay is the other big problem. Most indicators need to look back at least a couple of bars, but that means relying on old data. The further back you look at the signal stability, the more disconnected the current price indicator is. One of the other problems caused by signal delay is the solution to signal noise. Most indicators only allow you to calculate the indicator after a bar closes. This clears the signal noise, but then the signal has extreme delay problems.

The solution to most technical analysis problems comes from a new class of analysis and technical indicators. They are called displacement theory ratios. What they do is focus on the data that counts and is responsible for creating trends. Some examples of the data that count are:

  • Markets with an upward trend are usually a series of higher highs and lows.

  • Markets with a downward trend typically have lower lows and highs.

  • Crowded markets have a high percentage of overlapping bars.

Most trends have certain price characteristics and nowhere does the current closing price dictate trends. For a market to rise it must make new highs. For a market to go down it has to do minimums. Meanwhile, most closing price data is making noise.

In the end, change theory ratios are the best indicators for daily trading because they only focus on the data they count. Exchange rates are not only accurate but have very little noise. The price indication only reacts to the bars that make maximums, minimums and percentage of overlap. All of this data is broken down into easy-to-read lines that are color-coded as follows.

  • Green = Measures the strength of the trend.

  • Red = Measures the strength of the downward trend

  • Yellow = Measures the sting by the percentage of overlapping bars.