Many traders use technical trading with indicators to help identify trade entry and exit points with a high probability of winning. Hundreds of indicators are available on most trading platforms
Therefore, it is easy to use too many indicators or use them wrongly and you may lose. This article explains how to choose multiple indicators, how to improve the indicators to make more effective
use of these technical analysis tools, and learn about trading with indicators effectively
Using multiple indicators to trade
Types of Indicators:
Technical indicators are mathematical calculations based on the past and current volumetric price or activity of a trading instrument. Technical analysts use this information to evaluate historical performance and predict future prices and based on that give the trader confirmation of his analysis. Indicators do not provide any buy and sell signals. Be careful and only trust your own analysis; The trader must interpret the signals to determine the trade entry and exit points that are compatible with his or her trading style. Several different types of indicators exist, including those that interpret volatility, and volume, momentum, trend.
Avoiding Redundancy:
“Multicollinearity” is a statistical term that refers to multiple counts of the same information. This is a common problem in technical analysis that occurs when the same types of indicators are applied to a single chart. The results create false and unreliable signals. Some traders intentionally apply multiple indicators of the same type, hoping to find confirmation of the expected price movement. However, in reality, multivariate linear relationships can make other variables seem less important and can make it difficult to accurately assess market conditions and predict the next price move when trading with indicators.
Using Complementary Indicators:
To avoid the problems associated with the multicollinearity, traders should select indicators that work well with or complement each other. This can be achieved by applying different types of indicators to the chart. A trader can use one momentum and one trend indicator; For example, the stochastic oscillator (a momentum indicator) and the average trend indicator, or the ADX (a trend indicator).
Keep Trading Charts Clean Easy-to-read
Keeping Charts Clean:
Since a trader's charting platform is their gateway to trading, it is important that charts enhance a trader's market analysis, not distract him. Easy-to-read charts and workspaces can improve a trader's awareness of a market situation, allowing a trader to quickly understand and respond to the market. Most trading platforms allow a great deal of customization regarding chart color and design, from the background color, style, and color of the indicator to the size, color, font that appear on the chart. Creating clean and visually appealing charts and workspaces helps traders to use indicators effectively.
Information Overload:
Many traders today use multiple monitors to view several charts. Even if seven screens are used, it should not be seen as a green light to dedicate every square inch of screen space to technical indicators. Information overload occurs when a trader tries to interpret so much data that it is all basically lost and scattered. If too much information is given, the trader will likely be left unable to respond. One way to avoid information overload is to get rid of any redundant and unimportant indicators If you don't use it, throw it away. This will help reduce the mess if you trading with indicators.
How to trading with indicators Effectively:
The charts can be saved once set up in an easy to use way it is not necessary to reset the charts every time the trading platform is closed and reopened. Trading symbols, along with any technical indicators, can be changed without disturbing the color scheme and layout of the workspace.
Colors:
Colors should be easy to view and provide plenty of contrast so that all data can be viewed easily so that it is comfortable to read. One background color can be used for order entry charts (the chart used for entering and exiting a trade), and a different background color can be used for all other charts with the same symbol. If more than one symbol is in circulation, a different background color can be used for each symbol to facilitate data isolation.
Layout:
Having more than one monitor is helpful for an easy to use workspace. One screen can be used for order entry, while the other can be used for price monitoring. If the same indicator is used on more than one chart, it is a good idea to place such indicators in the same location on each chart, using the same colors. This makes it easy to find and interpret market activity on separate charts so you won't get distracted.
Sizing and Fonts:
Bold, clear fonts allow traders to easily read numbers and words. Such as colors and layout and traders can experiment with different styles and sizes to find the most visually pleasing result. Once comfortable lettering is found, fonts of the same style and size can be used on all graphs.
It is important to note that technical analysis deals with probability, not certainty. There are no trading with indicators that will accurately predict market movements with 100% accuracy. While the incorrect use of indicators can blur a trader's view of the markets, traders who use technical indicators carefully and effectively can accurately identify high probability trading setups, increasing their odds of success in the markets.
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