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How To Combine Trading Indicators Like A Pro (Most Traders Get This Wrong)

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How To Combine Trading Indicators Like A Pro (Most Traders Get This Wrong)

hey hey what’s my friend so in today’s training you will learn how to combine trading indicators like a pro so you can better time your entries and exits right and get better trading results but first right have a look at this chart over here and tell me right what’s wrong with this well for some of you look at it may be thinking hey Reena there’s nothing wrong with this man this looks good right look at the signal of this this chart right the market is going up higher look this RSI is pointing higher the CCI is pointing higher the stochastic is pointing higher all this market is bullish is going up for sure the problem with this chart is that this group of indicators they are correlated they are notice oscillators right away they are calculated the way the logic of behind these indicators the math behind it is largely similar and that’s why this indicators they all move in the similar manner they’re correlated it’s not because the signal is strong it’s not because the market is about to go up higher it’s not because this is a high probability trade but rather this group of indicators they behave in a similar manner when one goes up the other goes up as well when it goes down this one goes down this one goes down this one goes up tongue goes up this one goes up it’s not because the signal is strong it’s because the logic behind it the math behind it right of this indicators are largely similar and this is a mistake right and many traders make when they use indicators you just splash it all there Chan try looks good all pointing in the same direction oh this is high probability trade let’s buy buy buy market reverse they get stopped out and they wonder why you know all these indicators they are all saying the same thing but you know I still lose money and that’s why right you can’t just splash any Tom Dick Harry indicator on your chart right it doesn’t add value to your trading you only clutters your trading the more indicators on your chart doesn’t mean that you’re gonna get middle a better interpretation of the chair not gonna get you no better analysis doesn’t work that way right it’s like you know trying to get your wife pregnant right you can’t fire one time ten times a hundred times it takes my month for baby to come up it doesn’t mean that you know you fire five hundred times all right the baby will come up in one month doesn’t work that way the more times you fire doesn’t mean it’s better and it’s the same as this right the more indicators that you add your chart it doesn’t mean it’s better you have to know what you’re doing okay so another question is how do I combine training indicators such that he adds value to my training such that you know it makes sense that’s the question okay so that’s what we’re going to cover right now okay how to combine trading indicators and by the way right if you’re enjoying this video so far give me a thumbs up if you don’t enjoy then hit the subscribe button alright so the question is how to combine trading indicators right the way to do it is that the way I do it is that I like to categorize them by their purposes some people like to you know categorize indicators by the category like you know oscillators volume trending indicators etc for me I like to categorize them by their purpose right and the way to do it right is that you have to know right the math behind all these different indicators and logic behind it and to make a life easier right I have broken down most indicators right into one of these four purposes right most indicators right you will land up in this one of these four purposes so the first one is market condition area of value entry trigger and trait management let’s talk more about it so for market condition right what you want to do is that identify right the trend identify whether the market is enriched identify where the volatility is high although there are many indicators for this right but to simply find this I’m only using moving average and every edge because I just want to illustrate the concept to you so for moving average okay you can see over here this black line over here is the 200 period moving average this one here so what this does right basically this indicators it measure historical prices right it sums up the historical prices over time so for example if prices have been falling right he woke up late the average right over the last 200 period for example 200 P removing everything Coakley’s the average over the last 200 period and then he plots up as a line on your chart so if the prices have been falling over the last 200 period the moving average will be pointing in horror okay so you can use this as a indicator to tell you whether the market is trending higher or lower one way to go about it is that if the price is below the 200 period moving average you can say that the overall market is in a downtrend and you want to look for selling opportunities like this one right over here right generally the price is below the 200 period moving average then you want to look for selling opportunities and opposite is true if the price is consistently above the 200 P removing average you want to look for by opportunity on the other hand right every stretch let’s talk a little bit about this you can actually get out the average range like this one here you can see over here okay the color here is quite bad so I’m just gonna adjust this color to help you see better okay you can see this is a pink line at the bottom okay you can see that now this indicator the ATR on is not correlated with stochastic and RSI and the reason because is because they are of different purposes every stretch it measures volatility in the market whereas the other two is just an oscillator that oscillates between zero and hundred so you can see that over here the line over here is hitting the wall over time what is it telling you it’s telling it over time right from here here okay volatility in this market over here is decreasing it’s nothing to do with the trend it only measures volatility in this market likewise over here I can see volatility you know getting a lower over here can see that the range of this candle of this bar so it getting smaller as well over here on the other hand right you can see over here this portion here volatility is high what does this tell this tells you that the range of the candles on the channel is large it’s white which actually is this part over here range of these candles are large it’s white so you can see that this is what ATR does it helps you identify the market volatility volatility whether it’s high whether it’s low and then maybe can use it to you know use the appropriate trading strategy for this different market conditions next one right area of value right for this one you’re pretty much asking right where my potential buying or selling pressure comes in you can use a tool like moving average or stochastic right let me explain so for example this one over here let’s change this to the 50 ma because you can see it’s a healthy trend don’t destroy how the price respects the 50 period moving average she finds area of value this lows this lows this loss and this loss so this 50 period moving average is acting as an area of valley where potential buying pressure could come it makes sense and likewise you can use a tool like stochastic as well whenever the price is below 20 right this could be an area of values well here here here here it here okay so these are two different indicators to help you identify area of value on the chat in essence right la area of value it’s telling you right where should you be by rushing you be by at the loss or I wish part of the loads right so area of value can help you identify know what it’s low in the market whereas the trending market that the tools to identify the market condition it tells you what to do she’ll be buying or should you be selling area value tells you where to buy where to sell moving on entry triggers so once you have your trading setup requirements let’s say it’s it’s there what is the trigger to get you into a tree right for many traders is to be as simple as candlestick patterns may be forms a hammer forms a shooting star whatever but you can also use indicators right to get you into a trade as a entry trigger for example two common ones are relative strength index the RSI or D don’t change channel so let’s have a look alright so for example RSI you can look to buying right when the RSI crosses above 30 so in this case here RSI I think is about 30 right ready crosses above 30 right it can be a buy signal on the RSI indicator that’s one way to surface and Henry trigger if you think about this right what the RSI does is that it measures momentum in the market so when our site crosses above 30 it is telling you that there is bullish momentum coming to the market and you can look to buy when it crosses above 30 so this is an objective way to you know enter a trade as an entry trigger same for stochastic right you can either use it as an entry trigger with stochastic crosses above Tweedy that’s possible as well and another one I want to share is the dungeon channel don’t change channel what it does is that it measures the previous day sorry the 20 week high and Tweety week low tester by default so one way it is is that if you want to trade breakouts right you can use the dungeon channel to appear we do get a bar right whenever the price hits the upper blue line is telling you that it meets a 20-day high there could be an entry trigger to enter a trade right so this is don’t cheat channel and finally right the last group of indicators right the used to help you manage your treat you know can help you use to setting stop-loss set your target profit right trailer stop-loss etc can use the chandelier stop pivot points every to reach etc so again just to illustrate let’s say we are going with a pivot point right so this is something that it’s a pretty you use pretty commonly I’m just gonna fire out the pivot point pivot points standard so you’re gonna see a bunch of light on your chart okay you can actually ignore all the earlier lines because it’s kind of irrelevant really the way pivot point works is that it takes the high-low a close zig price of the previous day and plots out right support and resistance for today in fact I can just it’ll remove all the earlier line since it’s not relevant there you go okay so all it’s gone right so what this tells you is that based on the previous day prices right this are the current pivots for today right so you might find resistance at this level resistance here and resistance here you might find support at this level here here and here okay so this is how pivot point works and you can use this right as target profit right to to use it to exit your tricks right where you might not have an eye and I do know where should I exit my trade pivot points can be used to help you to define your target profit and also another one is the chandelier crow stop okay so let me just show you what this one means so this one is generally a cruel stop so what happens is that you see this blue line in this pink line over here and I’m just going to change this to a twenty period here multiple is three okay so what happens is there for example earlier with only every sure it measures volatility the markets so when you drill your stop-loss right you’d want to set your stop loss too tight because it could be just due to a spike in the the normal market volatility and it gets topped out so one way to go about is use the volatility of the market right to trailer stop-loss so what you can do is that you can use the chandelier stop right does it that it adds a multiple to this ATR value for example the multiple you saw earlier I use three ATR okay so you can see it over here from this lows right let’s call it X okay you add on three ATR and this value let’s say is call it Y and this Y is that this pink line over here right this from this highs to this loss is 380 R so what this means right what chandelier stop does is that it gives you a level two trill your stop loss right so you can write trends in a market and you can imagine it as the price hits lower this pig line will go down nowhere as well alright so this is very useful to actually know write trends in the market ok so that’s how this indicator work so now what is the best indicator combinations how do you actually combine indicators right so the general guideline is this number one you have to know the purpose what are you trying to achieve if your indicators are you trying to define the trend are you trying to use it as an entry trigger are you using it to identify the area of value what is the purpose you must know the purpose second thing right only pick one indicator from each category early you saw the mistake that many traders make right three indicators from the same category doesn’t make sense right so only pick one indicator from each category and try not to have more than three indicators on each other because really you don’t need more than three right for me personally I used to just one sometimes two sometimes nothing at all it really depends if you are a price action trader I’ll say one or two indicators is more than enough to supplement right your price action trading and analysis okay so with that said let me share with you some examples okay so let’s say you are looking to capture a swing in a trending market you can use these three indicators moving average RSI pivot points let me show you and I’ll explain why so with nobody RSI okay I like to use a temp here RSI because it’s more responsive and takes into account – its of data I like to use 20 period and we don’t need a chandelier case stop right let’s remove this we have the moving average okay are those the three indicators moving average RSI pivot point okay we have moving average we have the RSI and the pivot point so I just remove the ATR for now so let me explain you what I’m doing with this you can see the over alright this SMP 500 we are using this moving average to identify the trend for us so since the price is above 200 ma we can conclude that it’s the uptrend so we’re looking for buy opportunities next thing we are using the RSI are SN entry trigger to enter trade so maybe the entry trigger could be row RSI below 30 okay we look to buy so right now RSI is still not below 30 yet right so if it goes below 30 and let’s say spice up higher right we will buy okay so that’s a helping us define the area of value and entry trigger the area of value is RSI below 30 the entry trigger is RSI crossing back above 30 and for exist drive we can use the pivot point to help us define know where the market might find potential you know selling pressure to us you know define levels to take profit so it could be the r1 r2 or r3 so does it make sense can you see how all these different indicators have their own purpose another example ATR and dodge channel so let’s say you’re looking for a low volatility break up trade right so what you can do is again let’s say we look at brain crude oil okay I just remove all those indicators remove this okay so low volatility breakout so what you want to do over here is a kid it’s your indicator it helps you identify volatility in the market so you can see that right now volatility is pretty damn low it’s near multi-year lows okay and the dodging channel can serve as a trigger to enter trade so when you see over here at the price breaks below this blue line rather hits the low of the blue line it’s telling you that he has made a 20-week low so this could be a low volatility breakout frame the price has made a 20-week low in a low-volatility environment and really if you want to you know any more indicators to trailer stop-loss you can you can use like for example the chandelier cruel stock two trillion stop-loss or if you want you can actually use a moving average to trail your stop-loss for example let’s say I pull our I mean tone appeared is quite high let’s say we use a 50 period moving average and so once you are got a bought the trade right where you go shut down the break of this lows in the low volatility volatility environment how do you bearish your trade right you can use a 50 period moving average and exit only way the price closes below it which is somewhere about here where the price closes above the 50 ma so you can see how the moving average how the dungeon Channel how the ATR indicator you can combine them right and to formulate the right trading setups and I hope this makes sense this is important okay so let’s do a quick recap right the more what different indicators they have different process you must know what is the purpose number 2 you must know what you need right are you trying to identify market condition are you trying to manage your trade are you trying to identify in real value etc not more than one indicator from each category because anything more is just it’s just noise it’s adding clutter to your chat doesn’t make sense and don’t have more than three indicators on your chart okay if you’re a price action trader in your using indicators I would say one more or two more it’s more than enough all right so with that’s it I have come towards the end of today’s training or I hope you got value out of it if you want me to cover any specific topics right leave it in a comment section below if you’ve enjoyed this video hit that thumbs up button subscribe to my youtube channel and I will talk to you soon you

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