20
2024/05
Boost your trading success with Classic Technical Indicators!
When developing trading strategies, most traders, except for a few who use naked chart trading, combine classic indicators to determine direction and decide on entry and exit points.
Understanding Some Classic Indicators
The KDJ indicator is designed for the safety of short-term operations and is characterized by its speed. It is one of the most sensitive indicators in the system, and proficient and flexible use can capture minimal trend changes, making it a powerful tool for short-term operations.
The DMI indicator can accurately inform us about future market trends, providing investors with appropriate buying and selling opportunities and capturing trends.
Combining these two indicators can reduce investment risk, improve operational safety, and identify the best entry and exit points.
Moving averages (MA) are widely used in the forex market. They can quickly signal bullish or bearish trends. The results can be surprisingly effective when combined with the DMI and VOL indicators.
How to Use These Indicators in Practice?
When the DMI and MA indicators give buy signals accompanied by increased volume, it indicates sufficient momentum and explosive solid power.
However, if volume does not increase significantly when DMI and MA give buy signals, the upward momentum is weaker, or there may be a false bullish signal.
Conversely, even if volume increases, without buy signals from DMI or MA, it’s not advisable to enter lightly.
How to Combine Indicators Effectively?
After understanding the characteristics of these indicators, remember multiple indicators working together can minimize errors when opening a position.
However, if you can close profitably right away, there is no way to guarantee subsequent trades will also be profitable. For ultra-short-term traders, strict stop-loss measures are crucial.
If the direction turns unfavourable or the price does not move as expected within the designated time, it often indicates the indicator signals have failed.
Combining Volume and Price Indicators
This is the most common combination. Experience shows that significant trends within the day are often driven by volume first.
Observing intraday lines reveals that volume increases precede all significant price highs and lows. Therefore, a surge in volume frequently marks a price turning point, usually followed by a long bullish or bearish candle, indicating market acceptance and positioning.
Application method: When MACD, MA, and VOL indicators align and confirm each other, it provides a reliable trading decision. Otherwise, use caution.
Using Oscillators and Trend Indicators
The most commonly used price derivative indicators are oscillators and trend indicators, which inherently conflict. The market constantly alternates between oscillation and trend, making it challenging to use indicators. Here are three principles for using these indicators together:
- Respecting the trend:Trading aims to capture price differences and profit margins. Following the trend provides more significant support. For example, even if the price retraces but does not break below the MA group, maintaining a long position with MACD or KDJ golden cross strategies and setting stop-losses below the moving averages ensures the best risk-reward ratio.
- Same cycle principle:Regardless of the current market, the goal is to follow a specific trend, whether bullish or bearish. Thus, oscillators like RSI or KDJ within this cycle only succeed when they show trends after forming golden or death crosses.
- Multiple indicator confluence:As mentioned earlier, signals from various indicators are more reliable, reducing error probability. For example, when short-term and medium-term MAs form a golden cross, and KDJ also shows a golden cross buy signal, combined with volume and breakout patterns, it likely indicates an upward breakout or a continued bullish trend.
Overall, combining indicators has advantages in increasing success rates. However, traders should keep it simple, as looking at too many indicators can delay decision-making, and many indicators may overlap. New investors are advised to apply for a demo account on a reputable platform to practice and compare before trading live.
