By the end of this video, you will learn about the crucial differences between indicators, strategies, and libraries in trading script development. Discover how indicators analyze price data for trend identification, how strategies automate trading decisions, and how libraries enhance code reusability to streamline your script development process. Whether you’re new to trading scripts or looking to expand your knowledge, this video has insights to offer on these essential components.
Let’s explore the difference between indicators, strategies, and libraries.
Indicators are the most common type of script you will find on TradingView. Formerly known as studies in version 4 and earlier, they are faster and more efficient than strategies. Indicators are used to analyze price data and generate visual representations on a chart. They help traders identify potential entry and exit points, trend directions, overbought or oversold conditions, and other relevant information. They also provide alerts for manual trading decisions. Indicators are typically plotted on the price chart or in a separate subpane below the chart. In Pine Script, you can create custom indicators by defining calculations and plotting functions using the indicator declaration in version 5 and above.
Strategies are used to automate trading decisions based on specific conditions and rules. They generate buy/sell signals and manage positions based on predefined criteria. Strategies can execute trades automatically or provide alerts for manual trading decisions. Just like indicators, in Pine Script, you can create custom strategies using the strategy function. Strategies have access to historical price data, can generate trading orders, and manage positions.
Now, libraries are new to version 5. Libraries are reusable code modules that contain functions, calculations, or other utility code that can be shared and used across multiple scripts. Libraries can provide commonly used calculations, mathematical functions, trading algorithms, or other functionality to simplify script development and enhance code reusability. In Pine Script, you can create custom libraries by defining functions and utility code that can be imported and used in another script by just using the import keyword for that library. There are already a lot of new libraries you can use.
In summary, indicators are used to visually analyze price data on a chart. They’re faster. Strategies are used to automate trading decisions based on predefined rules. And libraries are reusable code modules that provide functionality to simplify script development and enhance code reusability. Each of these components serves a different purpose, and you may often find yourself using all three of these.