The development of computer technology allowed the use of automatic trading elements in trading. So, various auxiliary advisers, scripts and technical indicators began to appear. In the trading terminal of fix api trader, there is a great abundance of various technical elements that facilitate the trading process.
However, such a wide choice of indicators makes you think: “Which technical elements should I use in my trading?” And today I will try to find an answer to this question.
As is known, there are several types of technical indicators:
• Trend indicators: display the presence of trend movement, its strength and current state of quotes;
• Oscillators: these are the leading group of indicators that indicate “overbought” and “oversold” financial asset;
• Volumetric indicators: reflect the presence of increased volatility due to an increase in the number of committed trade transactions;
• Custom: Of course, these indicators do not belong to a separate group. For example, similar indicators in the terminal fix api MT4 (https://www.metatrader4.com/en/trading-platform) are author’s developments, which can be attributed to trend or volumetric, or indicators of oscillators.
Returning to the question of choosing technical indicators, it should be noted that a stable result will be demonstrated by indicators from one group. It is not the species, but the group. For I recommend using in trading a combination of indicators of different types, but of the same group.
What do I mean?
Let’s look at an example. Take the popular forex strategy – “Trading Chaos” by Bill Williams. In his strategy, both trend indicators (Alligator) and oscillators (AO, AC) are used. That is, there are different types. However, they all reflect the direction of trend movement and entry points to the market in the breakdown of local fractal zones. This combination makes it more profitable to enter the market and look for points to exit from it.
To such indicators, I can relate and a combination of the same Alligator with the indicator MACD, or SAR and ADX. But at the same time, the use of the price channel and the indicator of Bollingerwill not make any sense.
Proceeding from this, it is possible to draw a small conclusion: all technical indicators should mutually complement each other and overlap the weak sides. Also, indicators should act in the role of the filter to select the most profitable entry points to the market.
What elements of analysis should be combined with technical indicators?
In addition to using classical computer elements for the analysis of financial assets, I also recommend the use of graphic objects to predict the future dynamics of price quotations of currency pairs in the fix api forex market. Namely:
• Fibonacci levels;
• Support and resistance levels;
• Price channels;
• Figures of the reversal and continuation of the trend.
Similarly to each indicator, the instrument you selected must confirm the predicted movement of quotations. That is, work in combination similarly to other indicators.
For example, when all signals from technical indicators indicate a decline in price quotations, as well as the value of the asset was beaten off from the support/resistance level or the Fibo grid– this is an additional confirmatory filter.
Important! Do not overdo the choice of technical tools for asset analysis. Only a small number of indicators can be combined with each other and, if you have 5 indicators from each group – this will not give a result. The best option is to use 3-4 indicators, as well as their combinations with graphic elements. There are also strategies that do not have indicators in their analysis – http://forexzzz.com/product/forex-zzz-lock-arbitrage/. Personally, I use a combination of MA and the price channel in my trading and compare them with wave formations. Thus, the indicators act as a filter, which confirms the presence of a certain wave cycle.
I draw attention to the fact that when choosing indicators for trading, it is necessary to rely on the very type of trading strategy and, again, apply only those elements that are combined with each other.