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Originally Posted by Attilitus
Alright... I was watching the USD EURO bounce this sunday morning and wondered how my strat of using a mixture of RSI, MACD, STOCH, and MFI signals all at once would work. It seemed that if all of the indicators gave non-negative buy/sell signals and one-two gave positive buy/sell signals with consistancy that it is a safe play in a channeling market. Obviously, this does not apply to markets in an extremely fast short term uptrend like the gap and run today.
Anyways, I decided to try and incorporate fibs to give myself a better indication of when one of my indicators "peaked." Is my method of using those TIs and buying/selling during an uptrend based on those TIs with the addition of fib retracements reliable? I feel almost as if my brief backtesting and trading today has been luck.
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Just a couple things... First--you may be using too many indicators. Keep it simple--or during heavy market trading times you may find contraindicating or conflicting signs that could delay an entry or worse give you the wrong sign or confuse you to the point where you don't trade when you could have. You need to pick only a couple of indicators max...like Stochs and EMA, or MACD and Fibs. Add these to your S&R lines and some Fibs or Pivot points--and you got quite a strong set of chart tools to begin with. For Forex, and this is just based on my experiences the past couple years, Support and Resistance lines are the most crucial, and after that these tend to do really really well for Forex indicators: Stochs, MACD, Bolingers, EMA's, Pivots and Fibs. Those will give you a good solid set of "tools" you can work with in order to trade from IMO. OIther folks may have indicators they use that work for them--not saying they don't exist or are better or worse. Point here is YOU have to figure out which indicators "talk" to you and which ones YOU understand the best and use those. Again however--pick just one or two to trade on to start and use and get use to how they work til you have them down. Then you can try out and add others to broaden your tool box.... Keep it simple..I mean--how can you expect 50 indicators to tell you much of anything when you can't see the chart underneath?
Think of it like this--its like learning a different language. If you learn only a few words--you can't expect to navigate thru a foreign city very well. But if you learn a lot of that language or fluently learn to speak it--you can get by quite easily. Pick a few indicators you like or have used before, and learn them inside and out..then move on and add others to try out and see how they compare to the other Indicators you already know. No hurry--Forex is always active and moving....
Second thing--Fibs are great S&R helpers..and the best thing Fibs are good for is helping you identify Entry and Exit target areas for trading...especially in Trends. If you add Fibs in to your S&R lines or use them for such--and toss in say a Stochastic or MACD or EMA for good meausre, then they can treat you very well for trading. Same for Pivots. Use Fibs outside of that purpose or conditional only with other indicators, and they won't work for what you may want.
Each indicator fills in an area of a puzzle--each one is a hint or clue to what MAY happen next.. When you have 2 or 3 "areas" solidly pointing to a trade or move--you have some good info to work from. If you have a puzzle that has 3 pieces--learn those three pieces and how they fit. No need to make that 3 piece puzzle a 6 or 12 piece puzzle...ya know what I'm sayin? Else you spend all your time looking at indicators and overthinking the process. Don't use indicators only conditional on their actions 'in concert' with other indicators. In other words--if Stochs is telling you one thing but MACD is telling you another--you get conflicting signals and need to figure out which one is right...or right at that moment in time. For example, If you use JUST Stochastics, or just MACD, you can then look elsewhere in your S&R, Fibs or EMA for other pieces to the puzzle. If the Stochs don't tell you what you need to know for the Fibs and S&R or EMA is tellin you, then try MACD and see if it makes the picture clearer..but don't flip flop around or use them all at once--or you can get information overload.. This is part of making for yourself a good trading scheme or method. This is like learning how to write or spell--without knowing how to write or spell you cannot expect to read a write a book. Use indicators singly for what they tell you, and assemble the puzzle together on the chart and track your ideas and trades....
Just my two cents...others may have differing views. Hope it helps...
Good luck...
-w
