Now that you know how some of the most common chart indicators work,
you're ready to get down and dirty with some examples. Better yet, let's
combine some of these indicators and see how their trade signals pan
out.
In a perfect world, we could take just one of these indicators and trade strictly by what that indicator told us. The problem is that we DON'T live in a perfect world, and each of these indicators has imperfections.
That is why many traders combine different indicators together so that they can "screen" each other. They might have 3 different indicators and they won't trade unless all 3 indicators give them the same signal.
In this first example, we've got the Bollinger bands and the Stochastic on EUR/USD's 4-hour chart. Since the market seems to be ranging or moving sideways, we'd better watch out for the Bollinger bounce.
In a perfect world, we could take just one of these indicators and trade strictly by what that indicator told us. The problem is that we DON'T live in a perfect world, and each of these indicators has imperfections.
That is why many traders combine different indicators together so that they can "screen" each other. They might have 3 different indicators and they won't trade unless all 3 indicators give them the same signal.
In this first example, we've got the Bollinger bands and the Stochastic on EUR/USD's 4-hour chart. Since the market seems to be ranging or moving sideways, we'd better watch out for the Bollinger bounce.
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