Trading with Multiple Chart Indicators

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ou are familiar with the most popular technical tools and we always repeat to combine them in order to increase your probability of winning.

But how do you do that? Which ones will you combine?

All of these indicators have its disadvantages, but when merged together, they will compliment each other and one will be able to compensate for another’s imperfection.

Some traders make sure that three different indicators show them the same signals before willing to enter a trade.

Bollinger Bands + Stochastic

First, we will take a look at a combination of Bollinger bands and the Stochastic indicator. 

Here it is a EUR/USD’s 4-hour chart.

The first thing you should notice is that the market is moving sideways, so you need to look for the Bollinger bounce. 

Do you already detect all those sell signals from the Bollinger bands and the Stochastic?

EUR/USD went up until the top of the band, which could play out a role of a resistance level.

But let’s check it with Stochastic before we make a move. 

Because the Stochastic reached the overbought area, it is expected the price to fall down soon, which proves that the upper band will act like we thought as a resistance level. 

In next few moves, EUR/USD has dropped down by 300 pips and if you did enter a short trade, you will be ma

The price continued falling down until it reached the lower band, which could act as a support level.

At the same time, the Stochastic was in the oversold area, so it was a clear go-long trade.

The price bounced, so you would have made some good profits out of this trade. 

RSI + MACD

Now let’s combine RSI and the MACD.

You will notice that the RSI has reached the overbought area, which usually is a signal for going short. 

But you want to eliminate the scenario where the price breakouts and this happens to be a false signal. 

So you wait a few moves and you see that MACD is showing a downward crossover.

Oh boy, you couldn’t get a cleared indicator that you need to enter a sell order. You don’t miss your chance andd…

Boom! The price dropped down harder than Lehman Brothers went bankrupt in 2008 financial crisis. If you don’t know the story, check it out here (link). You will be surprised how £600 billions business can go out of business. 

Let’s go back to see what happened next with our RSI and MACD.

The RSI went to the oversold region.

You know your lesson, you wait for a confirmation from the MACD before you decide to go long. 

Then a few hours later, MACD followed with an upward crossover. Definitely a BUY signal! 

The price went up and you enjoy the numbers added in your account balance. 

What is most important here is to not miss the fact that MACD gives signals slower than RSI.

This is due to various properties and different formulas of the technical indicators, which cause some of them to give early signals while others are a bit delayed.

Note that there is NO golden rule such as “If you use this combination of indicators, your trade will always be a winning one!”.

This is a hard NO! You will need to discover on your own which indicators work best for you.

Consider that you need to know perfectly how each indicator behaves relative to price movement, If you want to choose a working combination that fits your trading style.

We will continue later by explaining more about how to create a system using different indicators, but first, we will remind you of some of the main characteristics of these technical tools. 

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