How to trade with multiple indicators
After you read a few articles about trading strategies using several indicators such as MACD , RSI, Stochastic , Bollinger Band , and ADX then at least you know how to get profit and minimize losses in forex trading or stocks. And you must also know that all of these indicators are not very powerful tools but still have many shortcomings.
Because it still has shortcomings, so many traders combine several indicators ( multiple indicators ) to get a long (buy) or short (sell) signal in a pattern of price movements. For example, a trader uses 3 (three) indicators (MACD, RSI, and Bollinger Band) and will not open an open buy position or sell if the three indicators do not give the same signal that is buy or sell.
OK 🙂 we take a combination of 2 (two) indicators, namely bollinger band and stochastic as a trading strategy for the EUR / USD currency pair in a 4 hour timeframe.
Let’s see what each indicator indicates on the movement of the EUR / USD currency pair above.
Bollinger bands indicate that EUR / USD is overbought (overbought) which means that we have the opportunity to open a SELL position because EUR / USD will fall in price.
Stochastic indicates that the line has exceeded the 80 scale which indicates that the EUR / USD pair is overbought , which means that we have the opportunity to open a SELL position because EUR / USD will fall in price.
And a few moments later what happened? EUR / USD falls around 300 pips calculated from the lower band & scale 20 (as the stop loss limit) and we will get the pips if we open a SELL or SHORT position 🙂 and put a stop loss at that limit.
Then when the EUR / USD price has touched the lower band, we must be prepared to open a BUY (LONG) position by waiting for the confirmation of the stochastic indicator to be below the 20th scale or not.
Bollinger bands indicate that EUR / USD is oversold (oversold), which means our opportunity to open BUY positions because EUR / USD will rise in price.
Stochastic indicates that the line has exceeded the 20th scale which indicates that the EUR / USD pair is oversold (meaning oversold ) which means our opportunity to open BUY positions because EUR / USD will rise in price.
If we take this trading position then we will at least get 400 pips! not bad, GAN 🙂 enough to buy a motorbike.
Here is another example of a combination of indicators for trading strategies namely RSI and MACD.
Like using the principle of a combination of Stochastic with Bollinger Band, when using a combination of MACD and RSI we need to wait for confirmation that the two indicators indicate the same signal.
Looking at the EUR / USD chart, the RSI gives a SELL (SHORT) signal or indicates the market is overbought followed by a SELL (SHORT) signal from the MACD indicator as a confirmation and as we see the EUR / USD price goes down ( downtrend ).
After some time experiencing RSI downtrend giving a signal BUY (LONG) or indicating the market in oversold condition followed by a BUY (LONG) signal from the MACD indicator as a confirmation and such a prediction that the EUR / USD price rises up to form an uptrend pattern.
Confirmation signals are very important so that we do not fall into losses due to fake or fakeoutsignals (opening open positions too early and wrong). And keep in mind that every trader is always looking for a good combination of 2 or more indicators to get a tool that matches the trading style and of course that is all to get maximum profit 🙂
If you want to learn more about the trading indicators, please see and learn indicators such as MACD , RSI , Stochastic , Bollinger Band , and ADX . Good luck … !