Should You Combine Forex Indicators?

Unlike Forex signals and bots, Forex indicators are for advanced traders. Since they involve different types of charts, bar diagrams, and graphs, novice traders usually find them tough to handle.

However, that doesn’t mean they’re less useful. Once you get your hands on the right way of dealing with these indicators and the interpretation process, they can act as an ultimate forecasting tool. 

There are different indicators available. The selection entirely depends on your trading style and individual preferences. It’s up to you to use a single indicator or use them in a combination to get desired results.

Well, if you ask us, we think, ‘two heads are always better than one’. If you can use more than one indicator, then why restrict yourself to a single option only. 

This post is dedicated to highlighting the importance of using the combination of Forex indicators for better results. 

Let’s first begin with the simple definition of forex indicators.

What are Forex Indicators?

Forex technical indicators are tools used to predict price changes. These estimations take into account the volume and price of different financial instruments and help traders make trading decisions.

Those using the MT4 platform can easily include these indicators into their graphs or in a separate window using a specialized function. 

Popular Types of Forex Indicators

Some of the most popular forex indicator types include:

Trend Following Indicators

When it comes to forex trading, the majority of traders depend on trend-following tools. These indicators, as their name suggests, follow the trending patterns and guide traders accordingly. 

The idea is to recommend traders whether they should enter a long position or a short one. Moving averages are one of the biggest examples of this category. 

Trend-Confirmation Indicators

Trend following tools help traders determine the position of a currency pair in the forex market. But trusting any indicator without confirmation may result in hefty losses as well. 

So, this is definitely a good idea to measure whether your chosen trend following indicator is reliable or not. 

A trend confirmation tool can help you gauge the viability of the results provided by the trend following tool. 

MACD is one of the best examples of trend confirmation tools. This indicator measures the difference between two moving averages and then compares results with its own moving average. 

Overbought/Oversold Indicators

Once you’re able to determine the right direction using the above-listed tools, the next step would be to make a decision regarding whether you should enter the trade immediately after a clear trend is established, or should wait for the pullback.

You can easily determine this using the overbought/oversold indicators. There are many indicators that fall under this category, including RSI. 

Profit-Taking Indicators

When to take a profit on a winning trade is the question that confuses many traders. Bollinger Bands is the best example that takes into account the standard deviation of price changes over time. While many traders use Bollinger Bands to figure out the entry of trades, you’d be surprised to see the outcomes when you use this indicator as a profit-taking tool. 

Noticeably, RSI can also be used under this category. All of these indicators come with their own pros and cons. The best way to benefit from them is by using them in a combination. Keep reading to learn how you can use different indicators together for the best results. 

Why Should You Combine Forex Indicators?

Often one Forex indicator isn’t enough

Some Forex indicators are designed for long-term trading strategies, while others target short-term approaches. 

Similarly, some indicators are best suited to follow trends, while others keep their focus on momentum and volume. 

As you can see, a single Forex indicator is not enough to cater to your different needs. 

What multi-indicators approach does is it helps you benefit from the best of everything. 

Two or three indicators can be used at the same time

The good thing is you can use two or three indicators at the same time (depending upon your needs). 

For instance, you can use trend following indicators such as Bollinger Bands with momentum indicators like RSI to foresee both assets that have been overbought or oversold or also to gauge the momentum position. 

Now you must be wondering which Best Forex Indicator Combination can give you the maximum results. 

The next section sheds light on some of the best Forex indicator combinations that you can use to upscale your trades. 

These are some indicators we use together

Before you start combining different indicators, you need to have a general idea about all indicator categories. 

Some of the most popular indicator types include:

  • Trend following indicators
  • Momentum indicators
  • Volume indicators
  • Cycle indicators
  • Volatility indicators

As a general rule, one should not use many indicators from the same category. You can easily identify if they’re providing similar data by setting them up on a chart. If they rise or decline following a similar pattern, they belong to the same category. 

Momentum, RSI, and Oscillators all work more or less in a similar way. So, it’s better not to use them in combination. 

However, you can use RSI with MACD and Volume indicator as they all represent different price angles. 

Test and test more

The best way to identify the best set of indicators that is consistent with your trading style is by testing them over and over again. 

Choose different indicators from different categories and use them together to see which specific combination is delivering the best results.

You must also not stick to a single combination for a long time. Keep experimenting, and you’ll keep on reaping the benefits of all trending combinations. 

Conclusion

There is no denying the fact that we all have our favorite indicators that we love to use for our trades. But if we’re really looking to survive and grow in a vying trading world, we have to take a leap and try out other possibilities as well to witness great results. 

Which Forex indicators are your all-time favorite? Have you implemented a multi-indicator strategy for your trades yet? Pour in your feedback as we’d love to hear back.

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