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Chapter 12, Part VIII. Indicators: Tying it All Together. Page 2

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 20, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Pipruit: I’ll try to do it in that way, sir.
    Combination of Stochastic and Bollinger Bands


    Chart #1 | 4-hour GBP/USD, Stochastic (14;3;3) and Bollinger Bands (20;2)
    [​IMG]

    Let’s assume that you intend to use Stochastic for trend and signal identification, and filter it with Bollinger Bands. You intend to enter short, when both indicators give you this signal – Stochastic shows cross, according to our rules and the market hits the upper band of the BB indicator. The same is for entering Long.

    First signal from Stochastic comes at a perfect bottom, and it was confirmed by Bollinger Bands – the market has pierced it lower band. Second signal gives use nice possibility to catch a retracement low. You’ve sold due stochastic indicator that also was approved by Bollinger Bands. You’ve exited from this short position when market has reached level of oversold due to BB, although Stochastic has not yet given any signal.

    And the last one – although stochastic gives sell signal – you’ve not taken it, because it has not been confirmed by BB.

    AS you can see, you do fewer trades, when you combine two indicators, but the signals become more reliable.

    Combination of RSI and MACD


    Chart#2 | GBP/USD Weekly, MACD and RSI (9
    [​IMG]

    Here is very similar situation. The first signal appears, when RSI is coming out from oversold, a bit later MACD gives buy signal, showing the trend shifting to bullish, then RSI moves above 50% and confirms the trend. 15 Jun 2009 you see that trend is still bullish, but RSI is above 70% and shows overbought – it’s time to take profit.

    A bit later, RSI comes out from overbought and MACD shifts trend to bearish. At this time RSI stands relatively high and close to 70%. This suggest that entering short here will be safe enough. You close the position 08 Mar 2010 at the same reason – the trend is still bearish but RSI hits oversold. It’s time to exit. And so on.

    Pay attention, that RSI and MACD signals a bit separate in time. RSI comes a bit earlier, but MACD a bit later. This is normal. Anyway, you will have to do a great work to estimate necessary parameters for any indicator that you intend to use

    Pipruit: Commander, and may be exists some super-duper combination of indicators, that is better than all the others?​
     
    #1 Sive Morten, Dec 20, 2013
    Lasted edited by : Mar 24, 2016
    Hamza Samiullah and fran alvarez like this.
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