There are very many technical Indicators on the Olymp Trade platform and still trading without one?
That must be so daring of you.
But I bet, trading without technical indicators and guided strategies have seen you lose continuously to the point of blowing several accounts.
But your fate is about to change. In this post I’ll teach you how to combine technical indicators to develop a trading strategy on Olymp Trade!
Come with me. Let us see how you can use technical indicators to develop trading strategies. Read the whole article to the end paying attention to all details.
Can I guarantee you something?
By the time we are done you must be able to put in place various indicators to form a strategy, then use that strategy to generate profits on Olymp Trade!
Technical indicators and strategies.
For accurate predictions of price movements on Olymp Trade, one must develop a working trading strategy using several technical indicators.
Technical Indicators are mathematically based and can be used to analyze past trends and patterns in order to predict the future.
Trading strategies like entry, trade management rules, and exit often rely on one or more technical indicators to guide a trader’s decisions.
There is no evidence to suggest that one indicator is foolproof and enough to make accurate decisions on whether to buy or sell. Using a set of indicators is advisable.
A strategy specifies the exact conditions under which trades are established as well as when positions are adjusted and closed. It is a set of objective, absolute rules defining when you should take action.
Strategies include trade filters and triggers which are often based on technical indicators.
Strategies will always vary depending on the investor’s risk tolerance, experience, and goals, or objective.
Using technical indicators to develop trading strategies.
While an indicator is not a trading strategy, it can help traders identify market conditions.
A good strategy acts as a trader’s rule book and thus traders often use many indicators to come up with those guides.
Different categories of indicators are recommended when forming a strategy.
Technical indicators are of different categories including trend, volume, volatility, and momentum indicators.
Using three different indicators of the same type results in the multiple counting of the same information which produces redundant results. It makes other variables appear less important. This is statistically referred to as Multicollinearity.
That then means that traders should select indicators of different categories. Most times, you use one indicator to confirm if the other is giving an accurate signal.
A trend indicator may be used with a momentum indicator, for example, for confirming if the signal is worth it and valid.
RSI has various user-defined variables like determining overbought and oversold levels.
This then means that it can be used to confirm any signal that the moving average gives.
If the moving averages give a certain signal which the RSI does not confirm, the signal might be less reliable and the trade not worth taking.
Best Combination of technical indicators.
Let us look at the best combinations of indicators you can use to form a trading strategy on Olymp Trade;
Moving averages will clearly show lines moving in the direction of the trend so you can know the direction. Bollinger bands show clear channels that tell whether the price is close to breaking out or returning to the normal.
A summary of trend Indicators on Olymp Trade and how to use them;
- Parabolic SAR.
- Exponential Moving Average.
- Simple Moving Average.
- Weighted Moving Average.
- Bollinger Bands.
- Ichimoku cloud.
- Zigzag indicator.
- Average Directional Index.
- Alligator and many more.
Momentum indicators – These allow you to determine the direction and strength of a current price movement. As an asset begins to build momentum, opening a new position in that direction is less risky. Examples of these indicators are;
These technical tools help traders identify the relationship between price and volume. An increase in trading volume almost always results in an increase in price. However, these events may not occur at the same time. That means that volume indicators are good for advanced forecasting. Examples of these are;
- Chaikin Money Flow.
- Money Flow Index.
- Volume RSI.
- Volume price trend indicator.
You can find them on Olymp Trade MT4 platform.
Volatility Indicators – These help to gauge the volatility of the market whether high or low. Sometimes they may even show the direction of volatility.
Examples of these indicators are;
- Bollinger bands.
- Average True Range.
- Relative Volatility Index.
Each strategy requires research to determine how to suitably apply it.
Backtesting to see how it would perform in the past gives insights into how it would perform in the future.
This does not change the fact that past market behavior may not be replicated in the future, but it can help a big deal in developing a profitable strategy.
The strategy must identify how the readings will be interpreted and what action to be taken then after interpretation. If such is not addressed, then what is the use of the strategy anyway?
Choosing the Indicators to develop a strategy depends on an individual trader.
Long term traders may focus on trend following strategies and thus use trend following indicators like moving averages.
Short term traders on the other hand may be more into volatility and thus choose volatility-based indicators. For both categories, confirmation indicators need to be put in place.
Now that you have understood how to best combine technical indicators to form a trading strategy, what holds you back?
Develop your own trading strategy today and tap into the many trading opportunities on the Olymp Trade platform.