The whole truth about indicators: read, combine, earn

The whole truth about indicators: read, combine, earn

The whole truth about indicators: read, combine, earn

How many times have you been disappointed in the most popular indicators, sincerely not understanding how they could earn the love of hundreds of other traders? The reason for this is not the indicator itself, but its incorrect use. In this article, you will learn everything about indicators and learn how to combine them correctly.

If you want to use standard MT4 indicators so that they bring you profit, see the recording of my webinar. After spending just one hour of your time, you will learn how to accurately determine the place of entry and exit from the market thanks to a competent combination of indicators, as well as master a strategy that gives 200-300% to the Deposit per year and reduces the risks for one transaction to just 3 %.
The development of indicator trading has been widespread since the formation of the international Forex currency market. What is an indicator? This is a universal tool that combines a different approach to market analysis and is designed to determine the trend, identify support and resistance levels, overbought and oversold a particular instrument, as well as generate signals to enter the market. Some show a signal with a delay, others at the moment of price movement, and others generate a potential profit and a protective order.

How does the standard indicator trading process work? After selecting and installing the indicators, we start testing them on the trading strategy manually. Why manually, and not using a robot or computer program? Because we need to feel the system, understand it 100%, and quickly be able to determine the entry and exit points. The strategy must produce a positive result for at least 5 years of history. A positive result is a positive Deposit history for each individual year, because not every month the market will move as we want.

It should be remembered that for us the main task is to earn money at a distance. But if everything is so simple, why do most traders "kill" their Deposit? The answer is simple – the wrong combination of indicators. It is a combination, because not all indicators complement each other and not all indicators can be used in the same trading system. Others need to modify and change the input parameters for trading on higher or lower timeframes. Other reasons for the loss of the Deposit include laziness of testing the strategy manually, searching for non-existent signals, psychological instability and instant greed.

If you have read or heard somewhere that you can earn millions on the international Forex currency market without making almost any effort, using an average Deposit, I will immediately disappoint you – this practically does not happen. There is no magic button. In a short period of time, you can increase your trading account by 2, 3 or even 5 times, but, as practice shows, in the end it successfully merges. A simple example: a good marathon runner is not the one who ran the leader of the 10 or 20 km distance, but the one who came to the finish line first.

Indicators can be divided into two types and supplemented with a third, auxiliary one.

Trending – determine the price movement and direction of the market at a certain time interval. Parabolic Sar, Moving Average, ADX (Average Directional Movement Index), Bollinger bands
Oscillators are indicators (lat. oscillatio – swinging), the main role of which is to determine the further movement of the price. Stochastic Oscillator, RSI (Relative Strength Index), MACD (Moving Average Convergence/Divergence), ATR (average true range), Momentum, RVI (Relative Vigor Index)
Psychological – important support and resistance levels and so-called round levels

So, let's go directly to the analysis of some selected indicators.

1. Moving Average is the main indicator that determines the trend and price behavior at different time intervals, including corrective movements. MA shows the average price level. Most traders use a number of Fibonacci numbers (13, 21, 34...) for the Moving Average.

Getting a signal:

If the price breaks through the average MA from top to bottom – a sell signal.
If the price breaks through the average MA from the bottom up – a buy signal.
The third type of position opening is Moving Average tests. Often the market is suitable (testing) its limitations thereby giving us the opportunity to get additional profit.

It is important to note that you must wait for the candle to close on the traded timeframe. This is due to the fact that the market often makes false moves and knocks inexperienced players out of the market. Very often, MA LEVELS are strong support or resistance. It should also be noted that at longer time intervals, there is less probability of receiving false signals and Vice versa.
2. MACD (Moving Average Convergence/Divergence)

The MACD indicator uses three moving averages in its calculations. This indicator calculates the difference between fast and slow moving averages. A fast moving average represents a short – term trend, while a slow moving average represents a longer-term trend. When the MACD is above zero, it means that the fast moving average is higher than the slow one. When below zero – the opposite is true. Accordingly, the growth of the MACD indicates an increasing bullish trend, and its fall – a bearish one. As a rule, the periods 12, 26 and signal – 9 are taken, and the price for calculations is the closing of the candle. It is best to use this tool in the long term.

the MACD line crosses the signal line from bottom to top – buy;
the MACD line crosses the signal line from top to bottom – sell.

It is important to note that the MACD does not have overbought or oversold levels like the RSI or Stochastic. However, if we look at historical data, we can see that these levels can serve as a kind of support and resistance.
3. ADX (Average Directional Movement Index)

The main task of the ADX indicator is to determine the strength of the trend. Graphically, it represents 3 lines on a scale from 0 to 100. The two main lines are +DI (represented as a black broken line on the chart) and DI- (red broken line). The third (green) ADX average measures the strength of the market and answers the question "what trend is the market in" – ascending, descending or chaotic (without a pronounced trend). If the value of this parameter is above the "40" level, then we can talk about a strong trend. If it falls below the "20" level, it is weak.

Buy signal – the DI+ line crosses from bottom to top DI-, which are simultaneously above ADX. (DI+ > DI- > ADX)
Sell signal – the DI+ line crosses from top to bottom DI-, which are simultaneously below ADX. (DI+ < DI - ADX)
4. RSI (Relative Strength Index)

For this indicator, the standard parameter is the average with a time interval of 14 days. Investors who prefer lower time intervals can use the average from 7 or 9 trading sessions. For long-term trading, the priorities will be 21 or 25.

This indicator moves on a scale from 0 to 100, just like ADX. An important role is played by the 70 and 30 levels, which show the overbought and oversold market.

Basic thesis:

If the RSI is at 100, there is a high probability that the trend direction will change from bullish to bearish;
If the RSI is at 70 or higher, it is a sell signal;
RSI at 30 and below is a buy signal;
If the RSI is at 0, there is a high probability that the trend direction will change from bearish to bullish.

It should be noted that a significant part of investors are waiting for the market to enter the overbought and oversold levels and open positions only after they break through.

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