TA Challenge Special: How to combine technical indicators effectively?
Is it always better to take more technical indicators into account?
How many technical indicators do I need exactly?
Which indicators complement each other the most?
...
Do you often ask yourself these questions while studying technical analysis? You are not alone!
Welcome, mooers! In our TA Challenge Special today, we will take a break from our journey of learning technical indicators and ask ourselves an important question: How can we effectively combine technical indicators?
Let's take a closer look at the following chart. Did you notice anything unusual?
*For illustrative purposes only. Not a recommendation of a specific security or investment strategy. Past performance is not indicative of future results.
It's evident that the three indicators, namely WMSR, KDJ, and RSI, demonstrate either identical or very comparable patterns. It seems they are all moving in the same direction. If you are new to technical analysis, you might be curious whether these indicators can confirm one another due to their similar trends. Does having more indicators necessarily lead to better investment decisions?
Well, it's a common misconception known as indicator redundancy, where the group of indicators being applied is correlated. This group of indicators is known as oscillators, and they are computed and used with similar reasoning. Indicator redundancy could lead to problems such as:
• Duplicate signals
• Overemphasizing certain information
• Neglecting certain information
To achieve a precise technical analysis, it is crucial to determine the relevant indicators and specify their objectives ahead of time.
The table provides an overview of commonly used technical indicators and their categorization (some of the indicators may fall under multiple categories, such as MACD). Each type of indicator plays a different role in technical analysis, which can be summarized as follows:
Trend indicators - Measure the direction and strength of a trend, often with price averaging as a baseline.
Momentum indicators - Help identify the speed of price movement by comparing prices over time.
Volatility indicators - Measure the rate of price movement based on historical prices.
Volume indicators - Measure the strength of a trend or confirm a trading direction based on volume.
Momentum indicators - Help identify the speed of price movement by comparing prices over time.
Volatility indicators - Measure the rate of price movement based on historical prices.
Volume indicators - Measure the strength of a trend or confirm a trading direction based on volume.
In summary, there are multiple classifications of indicators, but the general guidelines remain similar:
• Specify your objectives for using the indicators.
• Select one indicator from each category.
• Refer to no more than 3 indicators.
Let's chat
Have you discovered an effective combination of technical indicators? Share your thoughts in the comments!
Rewards
• Every mooer who comes up with at least one combination of technical indicators will get 100 points.
• We will select 8 top comments under this post. Winners will get 500 points from this challenge, with which you can exchange gifts at Rewards Club.
Event Period: May 11 – May 25
Disclaimer:
This presentation discusses technical analysis, other approaches, including fundamental analysis, may offer very different views. The examples provided are for illustrative purposes only and are not intended to be reflective of the results you can expect to achieve. Specific security charts used are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.
This presentation is for information and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. See this link for more information.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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Problems : RSI EMA volume
WizIT : Thanks!
70698353 : hello
SSS AhHuatKopi : Using combination of EMA, William, ATR & volume. Not too messy on chart.
Parker : Macd Rsi Bollinger Bands Vol
Balaraman Arvin : RSI, MACD and Volume
unocinco : new to all this still trying to figure it out.. but not giving up
71357606 : Moving averages: A moving average is a line that shows the average price of an asset over a specified period of time. Traders use moving averages to identify trends and potential entry and exit points. The two most common types of moving averages are the simple moving average (SMA) and the exponential moving average (EMA). The SMA calculates the average price over a specific number of periods, while the EMA gives more weight to recent prices. Moving averages can be used to identify support and resistance levels, and to confirm or negate trends.
Relative strength index (RSI): The RSI is a momentum indicator that measures the strength of an asset's price action. It oscillates between 0 and 100 and is calculated using the average gains and losses over a specified period of time. Traders use the RSI to identify overbought and oversold conditions, which can signal potential trend reversals. If the RSI is above 70, the asset is considered overbought, and if it's below 30, the asset is oversold.
Bollinger Bands: Bollinger Bands are a volatility indicator that consists of three lines: a moving average (usually the 20-day SMA), an upper band (two standard deviations above the moving average), and a lower band (two standard deviations below the moving average). Traders use Bollinger Bands to identify potential breakouts and to measure the volatility of an asset. When the price moves outside of the bands, it is considered a potential signal for a trend reversal.
MikeK : RSI with stoch rsi fast & slow ind - to help confirm buy/sell zones. An rsi >70 with stock K and D at/near 100, there’s a high probability for reversal. Match that up with volume decrease or support&resistance moving average levels. When 3+ of 5 indicators and indicator combinations all line up at the same price vicinity, then the greater the probability.
DudeThatsDerpy : RVOL, RSI, MAs, IC, BOLL/KELT, ATR. A little messy, yes, but if you can train your eyes you can spot divergences in price/volume at key S/R levels.
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