총 Top 4 Trading Indicators for Profitable Trading – Ultimate Guide for Success

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It is a common observation that most of the traders repeat a very common mistake while selecting the Trading for taking the trading decisions. So, we have developed a very comprehensive and research-based list of Best Trading Indicators for our worthy traders. Usually, traders are not well aware of the Trading Indicators working. Believe us, repeating these mistakes can be hazardous and damaging to your business and profits. Knowing about the Trading Indicators enables you to take the decision at right time and you would be able to use them at right time at the right place. Moreover, if you keep trading without knowing these indicators, you will keep losing your money and you will have to bear the unbearable monetary loss. We are going to explain all these indicators in detail and you will learn about the Trading Indicators and their usage. However, before proceeding directly to the Trading indicators, you should be well aware of their usage and purpose.

Why they are so important?

Basically, these indicators are helpful in three things which are as

  1. Analyzing the Market Conditions

These indicators help you assess the market and you will be able to learn about the market conditions through these indicators. You will be able to learn about trends, ranges, high and low values, volatility, etc.

  •  Hunting for the Area of Value

With the help of these indicators you can identify the areas with maximum profit probability. You can locate on your chart what type of offers are there to offer you suitable risk to reward. You would be able to learn profit with opportunity to buy low and sell high.

  • Plans For Entry and Exits

These indicators help you in assessing the many parameters to carve out your plans to enter or exit the market. So, you will be able to learn what the best time for making the entry is and what type if circumstances are suitable for exit.

Commonly Used 12 Technical Indicators

If you have keen interest in making the profits and want to have edge on your competitors, you should definitely learn about these indicators. We are going to tell you some of the very basic and important technical indicators. It will help you in understanding the motives behind the thinking of other traders and competitors in the market. Before directly jumping to these technical indicators, you should be aware of their types. At first, we will let you know about the indicator types.

Types of Indicators

There are different types of indicators providing different type of information on market conditions. Major types are as follows.

  1. Trend Indicators

These trends are used to assess and measure the trend direction and strength. Trends are set by comparing the prices with a pre-established baseline.

Moving Average: is one of the salient features of these trends. Moving average is used to assess the trends and reversals. Furthermore, you can know about the resistances and supports into the markets.

Parabolic Stop and Reverse (Parabolic SAR): You can use it to find potential reversals in the market price direction.

Moving Average Convergence Divergence (MACD):  You can use it to reveal changes in the direction, strength, momentum, and duration of a trend into the market for a specific product.

  • Volume Indicators

These are very helpful and strong trends to measure the strength of the volumes of the trends and share of the specific product into the market.

  • Volatility Indicators

Measure the rate of price movement without the direction with the help of Volatility indicators.

Bollinger bands: You can gauge the “highness” or “lowness” of price into the market in comparison with the trade history.

Average True Range:  You can assess the degree of price volatility.

Standard Deviation: This helps in measuring the estimated risk into the market. In addition to this, it helps to determine the significance of certain price movements.

  • Momentum Indicators

Technically speaking, these indicators are used to identify the speed of price movement. It is done by comparing the current closing price with previous price on closing.

Stochastic Oscillator: This is used to assess the turning points in the market. It is done by comparing the closing price to its price range.
Commodity Channel Index (CCI): This is used to identify price reversals, price extremes, and trend strength into the market for a specific product.

Relative Strength Index (RSI): It helps in measuring strength of trading, momentum of change in the trend, and overall amount of the move.

The below table shows the most commonly used indicators by categories in an arranged form. With the help of this table, you can prevent the use of indicators that are from the same category. Moreover, you would be able to combine indicators from different categories that complement each other for making effective and fruitful trading decisions. 

Here Are the Top Indicators You Should Learn About

However, we have shortlisted some of the best indicators you must learn and try while taking your trading decisions. Doubtlessly, trend following is one of the best tool in trading and you can achieve a remarkable position into the markets. Usually, trends take remarkable time for formation and there are a large number of factors affecting the direction of trend.

Because trends are tremendously acceptable in the trading markets, most of traders prefer to use trend following strategies. You can set your trend-following strategy in multiple ways with the help of different technical indicators.

We recommend you to become Trading trend follower and we are enlisting five trend indicators that you should learn about.

  1. The Parabolic SAR

Parabolic SAR (Stop and Reverse) is one of the commonly used trend indicator among traders. It is best tool to identify the short term trends. Simply, it plots the single dot above or below the high or the low in price in the graph. The Parabolic SAR uses a number of factors like an acceleration factor and extreme price. So, it is very useful factor to gauge the short term trends and can even detect change in trend as well. In addition to this, traders may use the PSAR to plan the entry or exit of a trade into a specific market. Chart shows the short-term corrections that are typical within the extended trends. Moreover, it shows how the PSAR compliments the moving average indicator for trading predictions.

  •  Price  Action

Obviously, Price is one of the most or you say utmost important variable from which all other indicators plan their trading actions and take trading decisions. So, it is inevitable to understand the price action trends. However, you can use different ways to understand the trend in price charts. From higher highs and lower lows for an uptrend and vice versa, every FX trader should start analyzing trends by looking at price first. Chart shows a EURUSD weekly frame of time chart with the highs and lows, showing an uptrend and a downtrend. Moreover, other than this price action variations are depicted with trend lines.

  • The Moving Average Convergence, Divergence (MACD)

Usually, Oscillators in technical analysis measure variables such as volatility and momentum.  However, besides gauging momentum in price, MACD is unique as it is also a versatile trend indicator. MACD consists of a histogram which oscillates around the 0-level and the fast and slow lines also known as the MACD. This oscillator fetches values from the exponential moving average indicator with the help of 12 and 26 periods simultaneously. As shown in chart, you can validate the trends in the price chart with the help of the combination of variables present in the MACD indicator.

  • The Moving Average

Doubtlessly,  moving average indicator is one of the mostly used and most acceptable FX indicators for identifying trends among traders.  However, there are different kinds of moving averages; they all follow the same rule. They all plot the average price for a specific time bracket over the price. So, prices can be either bullish or bearish when price lies above or below its moving average. Additionally, we can also know the strength of the trend which depends on the slope of the moving average. Chart shows a simple 52 week moving average on the price chart showing the strong downtrend for a specific product into the market.

Most of the time long term and short term are two moving averages   used in conjunction with signal bullish or bearish markets. There are a number of other technical trend FX indicators available for  moving average indicator  and that is the reason moving average indicator is important because.

  • The Ichimoku Cloud

This indicator is unique because it is a comprehensive trading system in itself. Primarily, you will find a large number of indicators in it. it is worth mentioning that Ichimoku cloud also known as the Ichimoku Kinko Hyo. Usually, you can identify the support or resistance areas with the help of these indicators. However, on the chart it measures -period and 26-period levels. Apparently, look similar in function and visually, the Ichimoku cloud is considered one of the go-to trend indicators. Because there is large number of variables in this trading system, many trading traders could find the Ichimoku indicator to be a bit confusing and complex. It is worth mentioning that the Ichimoku indicator derives very impressive results when it is a sustained trend in the Trading market.

Looking for the best one?

The indicators I have mentioned above are identified using the different methods used in identifying the trends into the market. Mostly, Trading traders make a very common mistake of using inessential indicators only because they look different in appearance.

Precisely speaking, you cannot derive the best results from a single trading indicator. As a trader, it is totally up to you to try out the different trend indicators to sort out what is the best strategy for you and ensure maximum profit. However, as far as my verdict is concerned I consider MACD Strategy – Simple Yet Best Strategy for Success.

MACD Strategy – Simple Yet Best Strategy for Success

The MACD Trend Following Strategy is one of the best trends following strategies to use to date. MACD stands for moving average convergence divergence. Moving averages change over time for a specific product into a specific market. They will decide whether they are generally converging or diverging into the trend. Consequently, you can easily predict the near-future price movements through the MACD Trend Following Strategy. It is worth mentioning that this strategy is very close to the trend following strategy as we discussed above.

Shockingly, one of the most important features of trend following strategies is that you can reduce or hamper your losses even if you have gone for wrong strategy. The reason for this is that market will reverse and resume the actual price at the end of the day. But it can maximize your potential profit at the same time. So, this strategy is included in approximately all lists of the best trading strategies compiled on the internet.

Usually, the MACD Trend Following Strategy yields best results on the higher time frames for a given product, as shown in the chart. So, this is the perfect strategy for you if you’re a swing trader. Our trend following strategy will enable you to learn how to properly use the MACD indicator. We will explain the precision of this tool in forecasting market turning points.

Our most liked day trading strategy which is Day Trading Price Action- Simple Price Action Strategy has been largely appreciated and accepted among the trading community.

If you are interested in becoming a day trader and do not want to be successful overnight, we have developed a best strategy for you. Directly land to the incredible MACD strategy we developed for our trader’s community.

You would be able to learn how to use MACD in an effective manner and how is the true trend in looks and appearance. You will be able to identify the super profit indicators. Moreover, we will justify why MACD indicator is the best trend following indicator ever.

What is the MACD Indicator Coupled with this strategy?

The most beautiful thing about the MACD Trend Following Strategy is that it only requires the use of one simple and easy tool. Moreover, it is one of the most popular and acceptable Trading indicators.

Doubtlessly, The MACD is the strongest and powerful trend and momentum indicator. The MACD is a commonly used technical indicator by the FX traders into the market.

Simply, you can determine the overall direction of the market with trend-following indicator whether it is bullish or bearish. In addition to this, a momentum indicator helps in determining the speed of the trend into the market.

If your put them altogether you will be able to develop the best ever trend following strategy. Doubtlessly, picture is worth a thousand words so here is how the MACD indicator looks like on a chart.  The MACD can provide a early signal that an previous trend is about to end and a new trend is about to start into the market. The MACD interprets the moving averages in a very clear and distinct clever manner. This indicator is very useful and yielding in trading trading strategies among traders.

It indicates changes in trend much near to the point when they actually start in the market. Have a look at the chart example to learn how the powerful MACD indicator is.

Working of MACD

The MACD’s moving averages and histograms are given with the help of price chart. A formula calculates them; this formula gives greater weight age to the most recent price movement’s data.

Price is the most important factor

Our  Price Action Strategy is a great briefing about type of price action strategy you should use and how it should look like. Moreover, you can use it in combination with the MACD Trend Following Strategy for even better results and success.

Indicator Setting

We are going to let you know about the best settings for indicators. We suggest default settings as one of the preferred settings for the MACD.

Buy and Sell Rules of the MACD Trend Following Strategy

Kindly, take a piece of paper and pen because you need to write down few things for better understanding and establishing a sound strategy for your trading.

Rules for Buying

First Step: You should be patient and wait for the MACD lines to develop a higher high followed by a lower high swing point before you make a decision. It is an unconventional approach for technical analysis. However, we use a different approach for Trading Strategy Guides. We don’t hesitate to try uncomfortable things if that’s what is required to be successful in this business and taking an edge into the remarketing.

First of all, we will visualize how an authentic swing point appears on the MACD indicator. The first and effective way of recognizing the swing high on the MACD indicator is to look at the price chart if the respective currency pair is doing a swing high the same as the MACD indicator does. Must be higher than all previous swing high points and a higher high is the highest swing price point on a chart.

However, a lower high occurs when the swing point is lower than the preceding swing high point. So, this will give the green signal o move for the next step for MACD Trend Following Strategy.

Second Step: Connect the MACD line swing points with a trend line. This step is very easy to follow. Here is how your chart should appear after you identified the swing points with precision on the MACD indicator. Now you have to connect them through a trend line.

It to keep in mind that we have ignored the MACD histogram because a lot of the relevant information is already conveyed by the moving averages. Have a look at price action and compare it to our MACD trend line. You can easily witness that the MACD has the price action much stronger and depicts the trend much clear. However, we are not done with the MACD indicator at this stage. It brings us to the critical part of our MACD Trend Following Strategy.

Third Step: Wait for the entry when the MACD line break above the trend line. When the MACD line represents the blue line crosses the signal line represents the orange line it is considered as a signal for the start of the bullish trend. However, if trading is such easier we would all be billionaires. So, hold and see with an objective of learning. This is a most important reason why our MACD Trend Following Strategy is so unique and different from the rest.  We have to wait for the MACD moving averages to cross over as well as we also have our other criteria for the price action to break aka the trend line we shown earlier.

This is a best method to rule out the fake or misleading MACD signals. However, you have to be equipped with the right thoughts and have patience until all the piece of the puzzle comes together for your better and fruitful understanding.

It is to keep in mind that if you will lose money if you trade just based on the MACD crossover over time. This is why it is not an authentic and trust worthy strategy. Contrarily, if you go for the MACD indicator equipped with other criteria as we have defined in this strategy, you will be able to identify the great trade entries on a regular basis.

Fourth Step: Always choose for the Protective Stop Loss Order means you have to keep the SL below the most recent swing low. We have explained very well how to enter a trade. You have to learn how to manage your risk and where to place the SL at right time.  You know the best trader is one who is basically the best risk manager. All you need to do is just try to place your stop loss below the most recent low.

However, you should protect yourself from possible false breakouts by adding a buffer of 5 to 10 pips away from the low.

Point to Ponder

The MACD Trend Following Strategy gives the buy signal upon the start of a new trend and this is the best time for you for making an entry and taking a buying decision. A profitable entry price means a smaller stop loss and it means you will lose a lot less comparing it with the profit potential, so there is a positive risk to reward ratio.

Fifth Step: Take Your Profit when the MACD crossovers in the opposite direction of your entry. Knowing when to take profit is very important as knowing when to enter a trade into the market.

We want to make sure that we don’t use the same trading technique for our entry order. When the MACD line as shown by the blue line produces signal line crossovers shown by the orange line. We want to close the position and take full profits for our traders. However, you have to wait for the candle to close prior to taking full profits.

Keep in mind that: Above we have discussed buy trade using the MACD Trend Following Strategy. For a sell trade, you can use the exact same rules in reverse order. The below figure shows a real Sell trade example with the help of MACD Trend Following Strategy.

Our Verdict

After all the above discussion we can say with confidence that MACD Trend Following Strategy is a simple trend-following strategy and a very profitable strategy simultaneously. So, “The trend is your friend” and irrespective of the fact that if you’re a beginner as a Trading trader or you have already an established trader life is much easier when trading in the direction of the line of least resistance instead of fighting the trend which is a loser’s game.  Momentum precedes price is the one simple rule behind the MACD Trend Following Strategy success.  However, our Trading Strategy team does not claim to be at the best position, but we have a solid understanding of how the market works and we can say it with full confidence.

Best Combination Strategy for Profit Maximization

When it comes to the indicators, we divide these indicators as three main categories as we discussed earlier in detail. Doubtlessly, knowing how to combine the best indicators in a meaningful and best manner can help you in making great profits. So, much better trading decisions totally depend upon knowing which one indicator belongs to which category. Contrarily, combining wrong indicators in a wrong way can lead to a lot of confusion and monitory loss definitely. So, be very careful when it comes to price interpretation and combining indicators for profit maximization. Here we are going to explain Best Combination Strategy for our worthy traderss.

Indicator redundancy – duplicate signals

Indicator redundancy conveys that a trader combines different indicators belonging to the same category and then shows the same information on the charts. Given chart shows 3 momentum indicators MACD, RSI, and the Stochastic in combination. Doubtlessly, all these three indicators give the same information because they are used to examine momentum in price behavior. Visibly, all these three indicators rise and fall simultaneously at the same time, flat, and turn together. Moreover, they flat during no-momentum periods (red boxes) simultaneously.

Next pic shows a chart with two trend indicators the ADX and the Bollinger Bands in combination. The purpose of these indicators is to depict the trend strength.

You can easily witness that during a trend, the Bollinger Bands move down and price moves close to the outer Bands. However, at the same time the ADX is high and increasing which is a confirmation trend. Bollinger Bands narrow and move sideways and price just hovers around the center during a range. Again, the ADX flattens or goes down during ranges depicting the same signal.

Overemphasizing information – Misleading Yourself

The issue with indicator redundancy is that when a trader chooses multiple indicators that show the same piece information, he ends up giving too much weight to the information provided by the indicators and he can easily overlook important things to follow.

If the trader is using two or more trend indicators may fool him by believing that the trend is stronger than it is actually. This is because both of his indicators give him the green light and he might miss other important information and signals his charts providing.

Combination of the Indicators in Useful Manner

Now we will discuss the most interesting and core part of our strategy.

The picture shows a chart with three different indicators that support and combined with each other. The RSI indicates and measures momentum plays, the ADX indicates trends and the Bollinger Bands indicates volatility. Here we do not use the Bollinger Bands as a trend indicator but just for volatility. 

We will have a look on the points from 1 to 5 together to see how the indicators complement each other and how choosing an indicator for each category helps you apprehend the price in a better manner.

 Point 1: The ADX shows a continuous trend and the RSI assures the rising momentum. Support and resistance broke as long as the ADX kept above 30 and rising during that trend.

Point 2: The ADX has turned and shows decreasing or bullish trend strength. This is an indication that the support level might not break. Price did not make it past the Bollinger Bands and reversed off the outer Band.

Point 3: Price is in the range and control, the ADX is losing its validity. An ADX below 30 confirms range-environment. However, in a range RSI indicator helps in identifying turning points combined with the Bollinger Bands.

Point 4: The same goes for point four. The ADX is still below 30 and in a range. The trader has to look for trend lines and rejections of the outer Bollinger Bands. The RSI is showing turning momentum at range-boundaries.

Point 5: Point Five shows a momentum divergence right at the trend line and resistance level, indicating a high likelihood of staying in that range. Again, price may not get outside the Bollinger Bands and the ADX will appear to be flat.

You can get complimentary information from the next chart shows that by combining a RSI with Bollinger Bands. RSI is providing the information about momentum of the trend. When it touché the value of around 50, means there is lack of momentum. So, a high and increasing RSI indicates strong bullish momentum.

Moreover, Bollinger Bands not only give information about volatility, but they also provide trend information. Price between the middle and outer Bands indicates a trending phase. Price crossing and breaking the middle Band depicts a potential reversal of the trend.  When price doesn’t reach the outer Band anymore, it shows that support is fading.

Best Combination is Key to Success

In a nutshell, here we are mentioning two of the thumb rules follow when you want to combine Trading indicators…

  1. Each Trading indicator should have a different purpose
  2. You should not use multiple indicators for the same purpose.

  1. Each Trading indicator should have a different purpose

Every indicator you choose for your trading strategy on your chart must have a distinctive purpose. Whether you are trying to identify the market condition, the area of value, or time your entry & exit you should keep this rule in your mind. So, if there is an indicator without the purpose, just remove it irrespective of its fancy look on the chart. This is because we are here to earn money and we cannot afford to waste our time by trapping with such misleading and misguiding factors.

2. You should not use multiple indicators for the same purpose.

We will brief with an example as

Suppose, you are eager to define the trend and you use Moving Average for it. It automatically rules out the use of any other indicator serving the same purpose as the Donchian Channel. This is because your purpose is well served by the Moving Average indicator. So, don’t waste your time by having multiple indicators serving the same purpose. Doing so will trap you in confusion and cause analysis paralysis as you get conflicting signals and you don’t know which one to follow.

It is to keep in mind that the perfect indicators combination is not the one that always moves in the same direction. But the perfect indicators combination is one that shows complimentary information need for profit maximization and taking trading decisions. It is pertinent to know that which indicator is o be used in which circumstances. This is because combining the indicators successfully is a ticket for your trading success. So, indicators that measure different factors on the basis of price action and later combining the information given by the charts is one of the strongest technique for positive impacts on your trade.

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