Technical indicators by their very nature are designed to give you some idea of the likely price movement in the future by performing calculations on the price movement of the past.  Since past price movement is fixed and cannot change, the information an indicator derives from it should also be fixed.  For most trading indicators this is true, but some indicators redraw past analysis data as new data comes in.  Called ‘Repainting the past’, this is usually considered a sign of a fraudulent indicator; one that tries to convince you it does a better job of creating trading signals than it actually does.  In some cases, though, it’s actually a useful technique for highlighting market movement features that might not be evident without ‘repainting’.

First, let’s be clear on what exactly repainting is.  All Forex indicators use data from previously occurring price bars.  Typically, for each bar that has occurred, there will be a data point in the indicator trace.  For instance, in a Simple Moving Average (SMA) the data point for a given bar is equal to the average of a certain number of past data bars (typically only the Close of each data bar is used).  If the Close of each bar used is already fixed – as will be the case when the bar has closed – then the value of the SMA at that point will be fixed, and cannot change as the result of further price movement.  However, the current data point – that is, the data point for the current bar – will change slightly (and sometimes considerably) as the data of that bar changes.  This is because the bar is not yet closed, and therefore the Close price is considered to be the current price as of the latest tick.  Obviously, if this ever-changing price value is part of the SMA data point calculation, the data point will not be stable but will fluctuate.  This, however is not repainting.  This is typical behavior of any indicator, and cannot be avoided unless the code for the indicator prevents any data for the current bar from being plotted.  This can be done but seldom is.  Most traders understand that the current indicator data point fluctuates, so masking it is not necessary.

True repainting is seen when past data points – those which are ostensibly based on price bars that have indeed closed – are seen to change.  A moving average of any kind, a digital filter or an oscillator would generally be rendered useless by repainting as these indicators are designed to provide accurate trading signals.  It’s important when assessing indicators of these kinds to be able to scan visually over past price action and see what the action of the indicator was relative to price movements.  This way a trader can get a sense of the accuracy of the trades signals the indicator has given as well as the tendency to whipsaw or otherwise create false signals.  An indicator that repaints the past does not allow this type of assessment because the past history of the indicator trace tends to change even though the price data on which it should be based does not.  A good example of this is the indicator called ‘Solar Wind’, which appears to make incredibly accurate signals, but in fact is falsifying the past through repainting.

There are, however, indicators which repaint for a specific purpose, and in fact which would not be useful if they didn’t repaint.  Indicators like this are what I call analytic indicators.  They do not generate usable trade signals and should never be expected to do so.  Instead, they tell you something useful about the nature of market movement in general over a given period of time.  This type of information can be very helpful when it’s used along with signal generating indicators – usually as a filtering mechanism to help avoid bad signals.  Examples of this type of indicator are ZigZag, which shows local high and low points and displays both the spacing and height of price waves, and Linear Regression Line, which gives a graphic display of the overall slope of price action for a period of time.  Neither of these calculations is possible without repainting behavior, but nonetheless they are very valuable indicators when they are properly understood and used.

So, in summary, if an indicator is intended to provide trading signals it must not be the type that repaints.  Make sure that the data points for already closed bars never changes as a result of future price movements.  Analytic indicators, however, may be very beneficial despite the fact that they sometimes repaint the past and in fact these indicators may be impossible to calculate without repainting.