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The IQ Option trading platform has gradually added a variety of indicators for the convenience of traders. How to avoid getting lost in such a variety and to select the tools that complement each other without generating double signals? Most of these tools can be divided into two categories: trend indicators and oscillators. For a better combination, we generally use indicators from different categories. Yes, it's simple. But there are some exceptions. Among these we find Ichimoku Cloud, which can belong to both categories, as well as the ATR and Bollinger Bands, which belong to the group of volatility indicators. To make understanding easier, we have selected 3 combinations of indicators that match perfectly.
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Awsome Oscillator and Alligator
The Awsome Oscillator and the Alligator indicator represent the perfect pair. They have also been developed by the same author, Bill Williams. Interesting facts: Bill Williams was a trader who preferred strong trends over prolonged time frames – conditions that are considered best for this combination of indicators, since both instruments are result indicators (follow the trend). The Alligator is a trend indicator.
In order to signal a new trend, identify its direction and show its strength, the Alligator can indicate the direction of the price movement, based on which it will be possible to open a position. The Awsome Oscillator, on the other hand, is a momentum oscillator designed to signal the entry points for the opening of an operation and the exit points for closing it once the trend has been defined.
MACD and Bollinger Bands
The MACD and Bollinger Bands can benefit a lot from each other. The MACD shows the convergence and divergence of moving averages. In order to indicate the inversion, the direction and the strength of the trend, MACD often leads traders to adopt strategies considering a next inversion of the trend. Bollinger Bands belong to the category of trend indicators that reflect the dynamic range of price movement.
They are able to indicate prices and volatility, defining high prices in the upper band and relatively low prices in the lower band. Being the MACD particularly versatile, this combination allows you to take various strategies. MACD is often used to generate input and output signals, while Bollinger Bands serve as a signal filter.
Ichimoku Cloud and RSI
Although Ichimoku Cloud, Ichimoku Kynko Hyo, at first glance could confuse the non-expert user, undoubtedly deserves his attention. The Ichimoku combines in one instrument the characteristics of a trend indicator and those of an oscillator. It can indicate the dynamics of the price, the direction of the trend, but also the levels of support and resistance. Despite being an excellent tool in itself, it is often combined with other oscillators to confirm the momentum of a certain direction. A pair that is widely used for this purpose is the one formed with the RSI (relative strength index), a momentum oscillator that determines the strength of the current trend signal and possible reversal points.
Discover your favorite combination by following these simple guidelines and without forgetting that each indicator, or combination of indicators, can sometimes generate false signals. Moreover, their accuracy can vary based on fundamental elements, such as the selected time interval, market volatility and major economic events. Test your demo account strategy before investing your funds.
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Source: IQOption blog 2018-09-20 09:40:21
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