The foreign exchange market is a thriving field of activity, where most countries’ currencies are traded online. Successful traders have managed to make significant profits in the market, but these achievements cannot be considered a coincidence or just a haul. In fact, it takes thorough research and careful planning to anticipate trading opportunities with the best prospects, which will also yield a dignified result. One of the many methods that frequent traders use to justify their trading choices is to combine the best Forex indicators. With that in mind let’s find out what is the best forex indicator combination.
Less is more
I remember how I used to have more than five indicators on my charts. I waited for them all to line up perfectly and hoped that now I have the most accurate signal ever. Oh, how wrong I was. Probably everybody goes through that phase when they are new to trading. Over the years I have learned that the more indicators you have the more confusion it creates. I think that you don’t need more than 2 indicators to make good trading decisions. There is no perfect indicator and therefore adding more to your chart won’t make it better, unfortunately. I learned it the hard way – lots of time wasted and capital lost.
I used to have a chart like in the picture below. Just too much noise there. And even when I had all the different indicators line up the way I wanted for my “holy grail” signal – it was not a good signal to trade.
There are few different forex indicator combinations that have worked really well for us, but the best one is moving averages crossover.
Best Forex Indicator Combination is EMA Crossover
This is a super simple combination but it works wonders if used correctly. Let me teach you how it’s done.
First, put two moving averages on your chart. We will add two Exponential Moving Averages with a length parameter of 50 and 20.
All my examples are taken using TradingView charting platform which is free to use, but you can use your own platform if you want to.
Click on the Indicators tab and search for “moving”. Then double click Moving Average Exponential.
Now add one with length parameter 50 and the other with 20. I selected a green and blue color.
Now our chart looks like this below. Very clean and easy to read chart. I know it’s tempting to add additional indicators for extra confirmation, but we have another better method.
When EMA 20 (green line) crosses EMA 50 (blue line) that is what we call EMA crossover. Get it? Because they cross each other. Hehehe.
We start looking for Buy orders when green EMA crosses blue up.
We look to Sell when green EMA crosses blue down.
Don’t trade every crossover blindly
The strategy is to trade when we have a moving average crossover, but unfortunately, we cannot just blindly buy and sell on every crossover. We need some kind of confirmation. We have made a profit with two kinds of confirmations: trend following and price action.
Trend following confirmation
Depending on what timeframe you trade there should be a nice trend along with the crossover. The trend and crossover must be on the same timeframe. You can use Forex Trendy to help determine if there is a favorable trend. Remember that you will lose money if you blindly trade every EMA crossover. When you have a trend on your side then you will be profitable.
Here’s an example of how to trade with the trend.
First, we check Forex Trendy trends tab and see that GBP/USD on 4 hour is in an uptrend. Now we know that we should watch GBP/USD H4 chart and wait for a crossover for buy order.
Now we change our TradingView chart to GBP/USD and H4.
And there it is! EMAs have just crossed. Everything is going by our trading plan. Time to place a buy order.
Price action confirmation
The other way to get a confirmation is to use price action. You can learn more about price action and our price action system here.
Here we want the indecision candle to form near the crossover. This method gives fewer signals, but they tend to be strong ones.
Few examples below.
In our opinion, simple crossing moving averages are the best forex indicator combination. The biggest mistake that people make is that they trade every cross blindly and therefore lose money. Crossovers need a little bit more confirmation and our methods work perfectly.