Lighthouse Indicator – A Comprehensive Review
Lighthouse is an indicator available on the MetaTrader 4 and 5 trading platforms that displays support and resistance levels to assist traders. This comprehensive review will cover what the Lighthouse indicator is, how it works, its features and settings, as well as pros, cons, and alternatives.
Overview
The Lighthouse indicator was first released on the MQL5 marketplace on April 15, 2014 and has been updated regularly since, with the most recent update on February 18, 2020 bringing it to version 3.34.
Lighthouse is designed to show traders the most important support and resistance levels on a chart. It draws the levels according to their relevance – thicker lines represent more significant levels.
The indicator also responds dynamically to price action. If a key support or resistance level is clearly broken, Lighthouse will immediately update the level’s role and color coding. Former support levels become resistance and vice versa.
Features
The main features of the Lighthouse indicator include:
- Automated adjustment to timeframe – Lighthouse detects the chart timeframe and adjusts analysis accordingly
- Displays significant S/R levels – Only the most relevant levels are shown to reduce chart clutter
- Graphical response to broken levels – Level roles and styling update when price breaks through
- Level relevance coding – Thicker lines indicate more important support/resistance
Analysis Modes
Lighthouse has several analysis mode presets to suit different trading timeframes and strategies:
- Intraday – Optimized for short-term intraday trading
- Medium term – For swing trades and daily charts
- High term – Identifies key levels for long-term positional trading
- Automatic – Detects the chart timeframe and adjusts analysis accordingly (default)
Using Lighthouse
Adding Lighthouse to a chart is simple. From the Navigator panel in MetaTrader 4 or 5, navigate to Indicators and double-click on Lighthouse or drag it onto the price chart.
The indicator will automatically scan the price history and draw significant support and resistance levels. Traders can then look for potential long/short entry signals when price approaches a Lighthouse level.
Lighthouse Indicator Settings
Lighthouse has several customizable settings traders can tweak:
Analysis mode – Choose between Intraday, Medium term, High term or Automatic detection
Left Margin – Horizontal offset from the left side of the chart
Line width – Thickness of drawn support/resistance lines
Line style – Style of lines (solid, dashed, dotted)
Strong level color – Color for more significant support/resistance
Weak level color – Color for less relevant support/resistance
Break level color – Color when a level is broken and roles switch
Price level precision – Number of decimal places to round S/R values
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Lighthouse Indicator Pros and Cons
Here are some of the main advantages and disadvantages of using the Lighthouse indicator:
Pros
- Automatically detects relevant support/resistance levels
- Responds dynamically when key levels break
- Coding shows level relevance and status
- Works across all timeframes
- Easy to set up and customize
Cons
- Can repaint when new price data emerges
- Too many levels drawn can cause clutter
- Doesn’t give actual trading signals
- Requires manual interpretation of levels
Alternatives
Here are some alternative indicators traders may want to consider for support/resistance analysis:
- Zones – Plots rectangular support/resistance zones rather than lines
- Pivot Points – Classical, Fibonacci, Camarilla pivot levels
- Supertrend – Trend-following indicator, can show potential S/R
- Fractals – Shows recent swing highs/lows as potential S/R
The choice comes down to personal trading style and strategy. Lighthouse focuses specifically on significant S/R levels, without extra features. Traders may prefer an indicator with more all-round utility.
Lighthouse Indicator Verdict
Overall, Lighthouse is an efficient indicator for highlighting important support and resistance levels on any chart timeframe. It detects levels automatically and updates dynamically with price action.
The indicator can assist traders looking to enter or exit trades at key zones confluences. It reduces noise by only showing the most relevant levels.
However, Lighthouse doesn’t actually provide buy/sell signals. It is up to the trader to interpret the levels and decide on trades. Repainting can also be an issue on lower timeframes.
Used prudently, Lighthouse can be a useful addition to a trading strategy. But as with any indicator, it shouldn’t be relied on as the only analysis tool. Price action, context, and prudent risk management are key.