When past signals and values of the technical indicator change after incoming new data, we call it a repainting phenomenon in Forex markets. Repainting can be very dangerous as it introduces inefficiencies and inconsistencies in trading.
How Repainting Affects Traders
We, as traders, always need to analyze past performance or backrest a trading strategy and often use various indicators to get trading signals. How can we analyze previous signals and the performance of the trading strategy if these signals always change? It is super important to detect if the indicator is repainting, especially when you are trying to use a custom indicator downloaded from unknown sources. One way of detecting a repainting indicator is to watch if the past results change on the chart. You might be asking right now: if repainting is this bad, then why are there still indicators in FX that repaint?
The main reasons why indicators may be repainted can be several: one is the inefficient programming of the indicator, and the other is to deliberately use repainting to show your indicator as infallible. Some indicators, that repaint, are popular among traders. At any rate, it is always advisable to avoid repainting indicators to maintain consistency in trading. Without analyzing past trades or testing the strategy, we traders will be more like gamblers rather than professional traders. Traders always search for an edge in the markets to make consistent profits, and gambling is not something we want.
Examples of Repainting Indicators
Before we proceed to the list of the non-repaint indicators, let’s list some repainting ones and explain why sometimes they can be useful, although on very rare occasions. Probably the most well-known repainting indicator in the FX scene is a ZigZag indicator.
ZigZag
Zigzag is mainly used to help traders identify significant price reversals by filtering out minor price fluctuations. Whenever the newer significant price movement is more than the previous one, the indicator repaints, which makes it a bit dangerous to use for trading. However, it is useful to make sense of extreme price points on the chart. Zigzag makes it much easier to see how price is behaving and can make analysis much quicker and more obvious to us. While experienced traders will see these points anyway, the indicator can be a tremendous help for beginners.
Fractals
Another very popular and well-known indicator is fractals. Fractals highlight potential reversal points in the market. But they also repaint, which can easily lead to false signals. Fractal points on the chart adjust with new price data, particularly the last fractal point can change depending on the new price data, making it risky for trading. The indicator is very useful to see swing highs and lows more clearly and can be a great indicator in conjunction with other indicators, but never as a standalone solution.
SuperTrend
SuperTrend indicator is commonly used for identifying trends and potential entry or exit points, and for repainting occasionally. It is calculated based on the average true range (ATR) and a multiplier value. SuperTrend plots the line above or below the current price chart showing the main direction of the market. The indicator can greatly aid traders as it indicates the current trend direction and potential support or resistance levels. As with every previous repainting indicator, it is always a terrible idea to use this indicator stand-alone for identifying the price trends.
