AI has become a popular tool for traders and investors in technical analysis. The Lorenzian classification method and neural networks are two free AI-based technical indicators that offer insight into market trends and movements. While these indicators are powerful tools for traders, it’s important to use them in conjunction with other technical analysis tools and exercise caution when making trading decisions. One strategy involves using the neural network to confirm entry based on order blocks.

How AI is Revolutionizing Technical Analysis in Trading
With two free indicators you can use to enhance your trading

Introduction
In recent years, the use of artificial intelligence (AI) in trading has become increasingly popular, especially in technical analysis. AI-powered indicators can quickly analyze vast amounts of data to provide insights that were previously impossible to obtain. Traders can use these indicators to make informed decisions and stay ahead of their competition. In this article, we will discuss two AI-based technical indicators that you must know about.

Indicator 1: Machine Learning
The machine learning indicator, created by JD Haughty, is based on the Lorenzian classification method. This method involves analyzing historical market data to identify patterns and trends that match the Lorenzian function, a mathematical function commonly used to describe spectral lines in physics. Using machine learning algorithms such as a neural network or support vector machine, the algorithm can predict future price movements based on the identified patterns.

The indicator assigns a number to each candlestick; the more positive the number, the higher the probability of an uptrend, and the more negative the number, the higher the chance of a downtrend. The indicator also comes with a kernel regression line, bar colors, and trade stats. Traders can customize inputs and apply various filters to the buy and sell signal, making them more precise. However, traders must use this method in conjunction with other technical analysis tools and proceed with caution when making trading decisions.

Indicator 2: Neural Network
Neural networks are modeled after the structure and function of the human brain and are used in various applications, including image recognition and natural language processing. They have also shown promise in the financial sector, particularly in trading. Traders can use a neural network as a technical indicator by training it on historical market data and relevant technical indicators, predicting the direction of future price movements.

One primary advantage of using neural networks is their ability to identify complex patterns and relationships in the data that may be difficult to detect using traditional technical indicators. Additionally, they can learn from data in real-time and adjust their predictions accordingly. However, as with any technical indicator, limitations exist, and traders must use neural networks as part of a broader trading strategy.

Strategy 1: Main Reversion Channel
Fareed Zulkeley created the Mean Reversion Channel indicator. Traders can wait for the price to retest the upper reversal channel, and if the closing price is higher than the middle yellow line, a sell label must be issued by the machine learning indicator. Traders will be able to enter the trade at a discounted price, and low-quality signals will be eliminated. As a result, traders can enter the trade at an optimal price and exit at a profit.

Strategy 2: Order Blocks
An order block is a significant price level on a chart where a large number of buy or sell orders are placed. Traders can use order blocks as a significant level of support or resistance that may impact future price movements. Using the signals issued by the neural network, traders can confirm their entry into a trade.

For a buy trade, the price must be closed above the 200 EMA, and traders will wait for the market to retest the bullish order block. Once the neural network gives a buy signal, traders can place a buy order at the close of the candlestick. For a sell trade, the opposite criteria must be met.

Conclusion
AI-powered technical indicators are transforming the trading landscape, providing traders with valuable insights into market trends and movements. By using the machine learning and neural network indicators discussed in this article, traders can make informed decisions and stay ahead of their competition. However, it’s essential to remember that these indicators are not infallible and must be used in conjunction with other technical analysis tools. As always, traders should exercise caution and prudence when making trading decisions.