Custom indicators can be powerful, but overoptimization leads to poor real-world performance.
Test on Out-of-Sample Data #
- Use Market Replay or the chart’s historical mode to validate custom indicators on periods not used in their creation.
- If it only works on the data you built it with, it’s overfitted.
Limit Indicator Complexity #
- Simpler formulas and parameter sets generalize better across markets.
- Avoid indicators with 10+ adjustable parameters.
Track Variant Performance #
- Use tags and Journal notes to record the variant or parameters used in each trade.
- Compare performance across different settings.
Prune Non-Performing Logic #
- Regularly retire or simplify custom indicators that show declining performance or inconsistent results.
- Less is more—keep only what works.
