These indicator systems are called "sighters". They are placed in line either between the fly line and the leader or between the butt section of the leader and the transition zone of the leader.

Early sighters were either fluorescent dacron backing or bright yellow Stren mono. The backing was wound around a pencil or dowel and striped with a black marker so it had a barber pole look for better visualization.

They can be used uncoiled or coiled. They are are used uncoiled when you are direct line Euronymphing as a "sighter" to focus your attention on for subtle takes. It reacts by twitching on a take.

The are used coiled when nymphing skinny water. You treat the sighter with fly floatant so that it floats as an indicator. For this purpose it is usually placed in the leader after the butt section.

To make the coils, you wrap the sighter around a dowel, and then boil it for about 10 minutes and then freeze it for 24 hours. The diameter of the dowel determines the diameter of the coils.

The problem has been visibility so improvements have been made with specifically designed products rather than plain mono. The sighters of colored mono like yellow Stren that you describe is version 1.0. We have moved way beyond that now. Next came bicolor mono as version 2.0. Mono is translucent so bicolor opaque sighters were developed as version 3.0. Now these have been improved with the version 4.0 "drops" bicolor sighters that have spheres of contrasting fluorescent UV activated paint on the contrasting bicolor line.

Here's the basic bicolor sighter material that is now used. It comes in varying diameters so that it can be incorporated into different thickness of the leader design.




Here is the "drops" style sighter that has bright fluorescent optic colored UV activated glue drops along the coiled indicator either commercial or home made.








The following article describes how to use the sighters in nymphing for spooky fish in shallow water.


http://www.flyfisherman.com/2012/03/...-skinny-water/