Note here that we do not use the Bollinger Bands as a trend indicator but just for volatility. We will go through points 1 to 5 together to see how the indicators complement each other and how choosing an indicator for each category helps you understand the price much better. During that trend, support and resistance broke as long as the ADX kept above 30 and rising. Point 2: The ADX has turned and shows losing bullish trend strength — an indication that the support level might not break.

Price did not make it past the Bollinger Bands and bounced off the outer Band.

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Point 4: The same holds true for point 4 — the ADX is still below In a range, the trader has to look for trendlines and rejections of the outer Bollinger Bands; the RSI shows turning momentum at range-boundaries. Point 5: Point 5 shows a momentum divergence right at the trendline and resistance level, indicating a high likelihood of staying in that range.

The next chart shows that by combining a RSI with Bollinger Bands, you can get complimentary information as well. The perfect combination of indicators is not the one that always points in the same direction, but the one that shows complimentary information. Knowing which indicator to use under which circumstances is a very important part of trading. Combining indicators that calculate different measurements based on the same price action, and then combining that information with your chart studies will very quickly have a positive effect on your trading.

Further reading: Indicator cheat sheet. Awesome article, thanks!

Will study and apply in depth. I am assuming this goes for crypto as well? Of course. That was a deep dive! Thanks man!

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Who knows how I can combine 3 Indicators together so they are not stapled underneath each other but combined together? Thanks for your help! I really learned a lot from your free materials and seriously considering to take your master class in February. Anyway, thank you guys! I realy learned lot of thing regarding indicator combination for success in stock market. Thanks a lot. Read the article, wow. It went really deep. Thanks alot. But is it possible to combine Stochastic Oscillator with MA???

Using Technical Indicators to Develop Trading Strategies

Thanks a lot for the article! What about the pitchfork? Can we use it as a trend indicator in a combination with the others? Save my name, email, and website in this browser for the next time I comment. This content is blocked. Accept cookies to view the content. This website uses cookies to give you the best experience. Agree by clicking the 'Accept' button.

The general consensus is that when the stochastic indicator has a value above 80, the market is considered overbought and that the market should come down.

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And when the stochastic indicator has a value below 20, then the market is considered oversold and should come back up. The way many traders get into a trade is when the stochastic lines go either above 80 or below 20, and then go Short or Long when the lines cross each other. Another way that traders use the Stochastic Oscillator is by using it to identify divergence in the market.

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The way many traders use the Bollinger Band is to identify when there might be an increase in volatility in the market with the bands. But when there is a sudden movement in the market, the bands will expand and traders will see that as a possible breakout trade. This channel adapts to changes in the volatility of the market and is used to indicate possible breakouts. For example, if the channel is narrow, then a move above or below the channels can indicate a breakout. The Momentum Oscillator is an indicator where traders use as a way to determine where the general direction of the market is headed.

This indicator was created using a formula that calculates the difference between the total recent gains and the total recent losses and the result is then divided by the total of all price movement over a defined period.

Similar to the Bollinger Band and Keltner Channel, the Donchian Channel is another indicator that has an upper and lower band. However, the difference is the Donchian Channel tracks the highs and lows of the market over a defined period set by the trade. For example, if you set the Donchian Channel to a period of 20, then it will draw a channel to show where the high and low is for the past 20 candlesticks:.

The way traders use the Donchian Channel is by trading in the direction of where the market breaks out of the channel. So if the ATR 14 gives a reading of 50 on the 1-hour chart, then it means that over the past 14 hours, the average movement of the currency pair is 50 pips. Unlike the other indicators above where traders often use it as a way to get into a trade, the ATR is most commonly used to place Stop Losses. And if the trader decides to place a Trailing Stop Loss of 1.

Understand the idea behind the indicator combinations, and then adapt them to your own trading style. Step 3: If the Momentum Oscillator is above zero, go Long at the close of the candle. If it is below zero, go Short at the close of the candle. Step 4: Close the trade when the Momentum Oscillator shows a weakening in momentum. On the left-hand side of the chart, you can see that the Bollinger Band went inside the Keltner Channel. Moments later, the market started to move out of both the Keltner Channel and the Bollinger Band and formed a long bar up that closed above both of the indicators.

At the same time, the Momentum Oscillator was showing a reading above zero so this is considered a Long entry. A few bars later, the Momentum Oscillator went below zero, and that was the signal to exit the trade. If you had used an ATR Stop Loss, then you would have still been in the trade and would catch the whole move up. So as you can see, this indicator combination has the potential to help you catch big moves in the market when volatility increases.

This indicator combination is most commonly used by trend following systems. Step 1: If the market breaks above the upper channel, go Long. If the market breaks below the lower channel, go Short. There will be no Take Profit level. The Trailing Stop Loss will either take you out of the market for a profit or a loss when it gets hit. But for my example, the Trailing Stop Loss has to be placed manually from the close of each candle. On the left-hand side of the chart, we have our first entry as the market broke below the channel.

That means if the market hits the other side of the channel, they not only get out of their trade but also enter a new trade in the opposite direction. This is my personal setup for swing trading and this is a very versatile setup because unlike the first two indicator combinations, I can trade with the trend and against the trend.

And the way I use it is to trade pullbacks and reversals with regular divergence and hidden divergence. Look for the market to form higher highs and higher lows. Step 3: If there is hidden divergence, wait for the market to close back above the 20 EMA. At this point, the Stochastic Oscillator is showing a hidden divergence where the market is forming higher lows, but the stochastic indicator is making lower lows.

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On the left-hand side of the chart above, you can see that the market is in a downtrend and the 20 EMA is below the 50 EMA. So go ahead, click the share button below now to help more traders get an Edge trading the Forex market. Who am I? On this blog, I will be sharing with you everything I've learned along the way to make you a more successful trader in the markets, and more importantly, help you create an edge trading the forex market :. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment.

Additional menu. Looking for the best indicators or indicator combinations that can help you trade better? Instead, find the indicators that best suits the needs of your trading style… But only use it as a way to help you read the market better.