Feb 20

Using technical indicators to compliment price action

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I hear ya, you are a price action trader, so no need for indicators. The same could be said about traders who use fundamental analysis have no need for technical analysis! The truth is, a price action trader can use technical indicators to compliment his or her analysis. Just like how a trader focusing on market fundamentals can use price action as a guide for market entry and exit.

 

Over the years I have noticed that certain indicators can improve price action trading signals. We all know that no form of analysis is 100% reliable, don't we? Perhaps using a couple of indicators may help you have a higher win rate for price action based trades. Below are the details of the things I have noticed. Open to feedback. Please also share your price action with indicator techniques!

 

Horizontal support and resistance

Indicator: RSI

 

Seeing price at a clear horizontal support or resistance is exciting. Seeing price at a clear horizontal support and resistance with an overbought or oversold RSI is even more exciting!

 

RSI would need to be clearly overbought and oversold and you would still need a trigger or confirmation candle but definitely something worth considering...

 

 

Reversal Patterns (head and shoulder, double-top, etc).

Indicator: moving average(s)

 

Not a moving average cross. Way to lagging for a reversal pattern. But how above price moving below the moving average(s) if a bearish reversal and above the moving average(s) for a bullish reversal?

 

Example below. Not the best of examples (using the same data as above). See how price confirms the bearish momentum by moving below the moving averages both times? This is a 50 and 100 SMA.

 

 

Reversal Patterns (head and shoulder, double-top, etc).

Indicator: MACD

 

Same as above but this time using the MACD cross...

 

 

Trend channels

Indicator: Bollinger Bands

 

Similar to price at daily or weekly levels. How about price at channel support and resistance with a candle close out of Bollinger Bands as a confirmation?

 

Once again, same data as used in everything screenshot...

 

 

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