Fan indicator v 1.0 - Grail or not?
Traveling through the expanses of the Internet, I came across a very interesting Fan v1.0" indicator for trade MetaTrader4 platforms. According to the creator of the indicator, it is based on the Fibonacci fan. If you look at the chart with this indicator (see Fig. 1), there are two reactions to what you see: "Wow, this is great!" or "How do you interpret it?". Let's see how to deal with this beauty.
The author of the indicator makes an explanation:
— При цвете Lime — веер раскрыт и расширяется.
— При цвете Green — веер раскрыт и сужается.
— При цвете Yellow — веер переплетен и расширяется.
— При цвете Orange — веер переплетен и сужается.
So, the empirical method of close observation of the chart has revealed that the indicator does not overdraw. And this is great, because Fan v1.0 puts itself above many others in this way indicators. Fan v1.0 also does not redraw its current indicator, because it simply does not exist. It gives the result only by the formed (past) candle, which is logical, because we cannot know what exactly the current candle will be. Thus the indicator does not mislead the trader.
Trading process
Let's start trading on this indicator, торговать будем «в чистую» — только по показаниям Fan’a, не учитывая основной тренд на старших таймфреймах и иных факторов, т.е. проверим индикатор на фактор стресса.
Terms of trade: для восходящего тренда (гистограмма выше нуля): цвет Lime – входим в покупку, цвет Green — входим в продажу. Выход из позиции по обратному сигналу, либо по смене цвета гистограммы на любой другой. Зеркально для нисходящего тренда. Временной интервал М15.
Here are the results we obtained after a short trading on the currency pairs USD/CAD and AUD/USD. Trading was carried out during the American session of August 31, 2010, manually (see Fig. 2).
Of course, it is possible to write off the result to an unsuccessful choice of time for trading, etc., but the result is obvious. It can be concluded that trading exclusively by indicator signals Fan v1.0, is fraught with consequences. Actually it concerns all "non-standard" indicators for MT4. As can be seen from the presented chart none of the 4 deals was successful. One trade was made on AUD/USD, the rest on the Canadian.
However, there is a discrepancy: the indicator does not redraw, but if you look at the chart, you can see quite good inputs. Undoubtedly this is true. But if you look attentively, Fan gives a lot of signals for position changing after a short time interval, that is, it lags behind, which is especially noticeable during the flute (see Fig. 3).
That is, during a flat, the indicator is doomed to fail. But to Fan v1.0 there is one more quite constructive approach - to make deals on the indicator histogram crosses the zero line. This will avoid a lot of trouble with the flat, but unfortunately not all (see Fig. 4).
According to our observations, it is possible that there may be strong lagging signals at zero line crossings, and there are more of them than good and long ones, which is also characteristic of almost all indicators. From all of the above, we can conclude conclusion: The Fan v1.0 indicator has the right to live, but only with a competent approach to it and trading. In any case, a more thorough test is required, because manual trading involves the most important factors - psychology and circumstances. In general, the market should be looked at more broadly and trade more flexibly.