Best Forex Indicator Combination: Predict the Market with Accuracy
Indicators are the basis for framing buy or sell decisions. As per the data, more than 70% of traders use technical analysis to make trading decisions. An indicator is the core concept to organize technical analysis indicators.
However, indicators are not foolproof and may generate false signals. Thus, professional traders use indicators in combination to enhance their decision-making. In this blog, we will learn about the best forex indicator combination to use in trading.
What are the Indicators, and why are they used in combination?
Indicators are the technical analysis tools that are based on either statistical or mathematical concepts. These tools study the historical price movement of currency pairs, provide key information about their future movement.
Indicators study the past data of currency pairs to provide you with future interpretations. The entire concept is based on the probability that currency pair prices tend to repeat history. However, there is no certainty that the market will act accordingly.
Making a trade decision solely based on one indicator’s findings is not a great idea. Thus, experienced traders use the best indicator combination for forex trading to improve the accuracy.
Here's a quick look at what you'll read
- RSI and Bollinger Bands
- Moving Averages and Relative Strength Index
- Bollinger Bands and Moving Averages
- Fibonacci Retracement and Moving Averages
- Stochastic Oscillator and Moving Average
- Average Directional Index and RSI
- RSI and Bollinger Bands
- Moving Averages and Relative Strength Index
Yes, combining indicators is undoubtedly a great strategy. It boosts the efficiency and enhances your decision-making.
A combo of two or three indicators is good; using more than three indicators can only make your strategy complex.
6 Best Forex Indicator Combinations
Using indicators in combination is not enough. Combining two right indicators and compatible indicators is also important. Here are the best combination indicators for forex trading:
RSI and Bollinger Bands
The combination of the Relative Strength Index and Bollinger Bands got the first place in our best forex trading indicator combination list. The RSI moves within the range of 0 to 100. When the price moves above 70, it suggests an overbought condition, and when the price moves below 30, it suggests oversold conditions.
Similarly, the Bollinger band has three bands. When the price touches the upper band, it suggests an overbought condition, and when it touches the lower band, it suggests oversold conditions. It also tells the market volatility.
You can plot both the indicators on the chart, as these are quite compatible. If both of the indicators say the same thing, you can go with the interpretation, and if not the you can avoid placing trades.
Moving Averages and Relative Strength Index
Moving averages have two lines, one of short-term MA and the second is long-term MA. When the short-term MA crosses above the long-term MA, the MA shows bullishness, and when the short-term MA crosses below the long-term, the MA shows bearishness.
RSI can assist you in determining the trend, trend reversal, and volume confirmation. Both tools work well together and provide comprehensive information.
Bollinger Bands and Moving Averages
Like the RSI, you can even pair the Bollinger Bands with moving averages. Bollinger bands help you in determining the current market volatility, overbought, and oversold conditions.
While moving averages can help you determine the trend with its strength. The forex indicator combination is no doubt a good one to try at least once.
Fibonacci Retracement and Moving Averages
Fibonacci is a leading trading indicator used by diverse traders with diverse strategies. Traders watch the Fibonacci levels to identify the crucial support and resistance points.
And when pairing Fibonacci with moving averages, it provides key insight to the market and helps traders in making trade decisions. The combination is ideal for trendy as well as retracement conditions.
Stochastic Oscillator and Moving Average
The Moving Average is an indicator that is compatible with almost every other indicator. You can even integrate it with the Stochastic Oscillator to generate trade signals.
Stochastic Oscillator is quite similar to RSI; it also moves between the range of 1 to 100. When it rises above 80, it suggests an overbought condition, and when it falls below 20, it suggests oversold conditions. Pairing the oscillator with moving averages will help you identify potential opportunities.
Average Directional Index and RSI
Average directional index is an indicator to measure the strength of a trend. It moves between 0 to 100. The ADI below 20 shows a weak trend, between 20 to 40 shows a moderate trend, and above 40 shows a strong trend.
So traders can use the Relative Strength Index for identifying the trend direction and the Average Directional Index for confirming its strength. If you are looking for the best combination of indicators for forex trading, you can give this a try.
Benefits of Using Forex Indicator Combination
Comprehensive Information:
When you use only one indicator, you can get limited information. Combining two or three indicators gives you comprehensive insights. Detailed information helps traders in making the right trade decisions.
Lower the Chances of False Signals:
When dealing with any technical analysis indicators or tools, the chances of a false signal are there. However, when you use multiple indicators, identifying fake trade alerts is much easier.
Versatility:
Using the indicator combination strategy is helpful for all sorts of traders. Whether you are a scalper or day trader, position or swing trader, you can go for this approach.
Identifying the Exact Entries and Exits:
When dealing with any technical analysis indicators or tools, the chances of a false signal are there. However, when you use multiple indicators, identifying fake trade alerts is much easier.
Improved Efficiency:
Using indicators in combination leads to improved accuracy. The success rate and the probability of making a profit are higher, while the failure rate and risk are lower.
Wrapping Up
We have discussed the top forex indicators combination; you can go for any of these. Just consider your knowledge, currency pair, profit expectations, strategy, and trading time frame.
Also, using a combo of two or three indicators is good; using more than three indicators can only make your strategy complex. In addition, consider the broader market analysis and fundamental conditions for making the trade decisions.