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If to return to indicators solution, try MACD 67, 76, 9, where draw two horisontal lines at 75 and -75 level and consider it to be a ranging market when MACD stays in between the levels as shown on the screenshot below:
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In the example below you can see how the Stair Step Strategy works with stocks trending down. You can tell by looking at Big Blue that the second high is lower but still manages to go above 85. Also notice how IBM barely rises while the indicator hits bought level, this is the divergence I 8767 m talking about. I hope you can see why the Stochastic Indicator has been around for over 55 years but remains one of the best technical indicators that are publicly available.
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I am considering trading on daily charts. For this purpose i am planning to use Stochastics Oscillator(default settings) for entry signals and ADX(default settings) for trend confirmation. Is it correct to use these indicator for the above purpose? If not can you suggest any alternative?
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What combination of indicators do you suggest to be able to determine when a currency pair has gone from a trending condition to a ranging condition and vice versa? Being able to tell when these conditions change at the earliest possible time would be extremely useful.
There are basically two kinds of indicators. You have trend gauges which help you identify the overall trend, which is what the moving average is. They can't really predict anything. Instead they help you know when something has changed - which is critically important, because people usually invest holding something without a thought to a trend change and then lose tons of money by holding too long in a bear trend.
Does those indicators listed above "duplicate" with each others?. Appreciate your wise opinion on this matter. By the way, thanks for sharing a lotta info in this informative site.. :)
There is no perfect way to test an indicator or system using historical data because past performance is no guarantee of future results. However the markets are driven by human emotion and crowd psychology. I believe that this behavior follows repeated patters and that effective historical testing can identify these patterns. In this way we can look to the past for an indication of the likely future.
You don't necessarily have to use many indicators.
The more indicators you use, the harder it'll be to find periods when all indicators agree on a signal.
Traders and investors analyze technical indicators when making market entry and exit decisions. Moving averages and RSI (relative strength index) are among the most widely used technical indicators.
This entry strategy is called the stair step method and uses the modified stochastic indicator to measure retracements away from the trend. To review, you must change the settings on the Stochastic Indicator from 69 bars to 5 bars for the slow line and leave the fast line at 8 as is. This slight modification is necessary to turbo charger the Stochastic for short term trading and creates one of the best technical indicators for short term market swings.