Updated on 19 October, 2021
There is an old saying that goes something like "there is no exact test, only approximate ones." But, with so many different types of testing tools and indicators out there, it can be difficult to tell which type is the best for you. Fortunately, there are a few indicators that have stood the test of time, have been consistently accurate, and are easy to use. Here are my top three picks.
The first one is the Test Indicator, which is a straight-line graph that shows a difference in a variable (usually performance) over time. Most of the time, this type of indicator will show a trend line. The Test Indicator is used more for making quick judgments about performance than for consistently interpreting numbers. However, if you need to quickly and easily track performance across the board, then this is a great tool to use. In particular, I recommend using the Test Indicator along with a good dashboard tool, such as Tradingview.
The second option is the Contact Point Indicator, which is a straight-line plot that shows the minimum and maximum contact point for a single indicator. Typically, most people use the Test Indicator to make quick decisions about a variable. However, if you plan to track over a longer period of time or multiple indicators, then the Contact Point Indicator may be more appropriate for you. The nice thing about the Contact Point Indicator is that it is relatively easy to replace. For example, you can replace it with a carbide alternative stick figure, such as a dog. It will eventually grow with your information and start to look pretty similar to the original indicator.
The third option, the Dial Indicator, is used to measure an unknown measurement, usually a swing or velocity. This is an excellent choice for calculating averages over long periods of time, but may have trouble measuring small changes very quickly. The problem with the Dial Indicator is that not many people are comfortable computing the unknown accuracy with this option. Most people will tend to find the best fit for their particular application, which may not always include the accuracy of the Dial Indicator.
The fourth option, the Plunger, is used to measure a velocity or swing against some type of range. Usually, you will use the Plunger's pivot point as the reference point. Using the Plunger to determine the value of a parameter, however, is rather tricky. The problem is that most traders tend to focus on only the maximum or minimum values of the indicator and completely miss the intermediate values. To complicate matters even more, using the Plunger to determine the value tends to give you the results you want, regardless of the accuracy of the main scale.
There are several other choices for measuring ranges, including some proprietary indicators and historical data. In general, however, there are a few main things to look for when choosing an indicator. First, the indicator should have an accurate value for your main scale. Second, the value of the indicator must be consistent over time and come within one standard deviation of the mean.
If you are using historical data as your main measurement unit, it is important that the accuracy of the measurement is greater than or equal to 0.00001. Your preferred choice of indicator should use a weighted range function in order to maximize accuracy. Finally, the accuracy of the indicator must not change significantly with the inclusion of additional information. For instance, a true measurement of stock price should have no relationship with the inclusion of prior price information or other historical facts. Indicators that are dependent on the addition of these factors are known as non-diversified indicators.
Test Indicator readings can easily be manipulated by a skilled Forex trader. For instance, if a trader finds that the majority of Test Indicator readings are consistently off the wrong side of the trading range, he may want to move his tradeout to a new test indicator. However, keep in mind that when using a dial indicator, a trader may end up having to repeat measurements hundreds of times just to get a reading that is meaningful. Thus, a successful indicator will work effectively if it performs consistently and independently.