Let’s take a look at trading with multiple chart indicators.
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.
Bollinger Bands + Stochastic
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.
Check out those sell signals from the Bollinger bands and the Stochastic.
EUR/USD climbed until the top of the band, which usually acts as a resistance level.
At the same time, the Stochastic reached the overbought area, suggesting that the price could drop down soon.
And what happened next?
EUR/USD fell by around 300 pips and you would’ve made a hefty profit if you took that short trade.
Later on, the price made contact with the bottom of the band, which usually serves as a support level.
This means that the pair could bounce up from there. With the Stochastic in the oversold area, it means we should go long.
If you took that trade, you would have gotten around 400 pips! Not bad!