Hello Community Members,

This time I have decided to write second part of my previous article, which was how to find a profitable indicator. After experiments I have found three of them and I am sharing with you all. As we know, technical analysis is purely done on price action method or with combination of indicators.

I feel everybody wants to be a successful trader, don't you?

My story is like this. At first instance I was successful to withdraw 50 USD out of 400 USD. But after that my account balance went down to 210 USD. Then I added another money to it and balance become 710 USD. Then went long in EUR/USD, which went into loss nearly 100 pips down from my buying price. But I decided to continue with the position as that time EUR/USD was trading near support. EUR/USD bounced back and so my account. After that I have turned 710 USD to almost 1200 USD in one weeks time. Again it went into loss and balance become 950 USD. So process went on as account was in surplus I am successful in withdrawing 750 USD from account and still my live account balance is 300 USD remaining. Now I am planning to grow it to 1000 USD. Nexr month I will participate in trader contest and hope there also I may get success. Below is the screen shot of my live account.

So here is my success formula.

Indicators are of two types leading indicator and lagging indicators.
LEADING INDICATOR: This are the indicators which are ahead of markets price action. They gives signals about future market conditions, that is when the market is likely to reverse the current trend. These are predictive in nature. Which means if prediction goes right a trader can turn out to get huge profits and if prediction fails trader can loose small fortune if trade is managed properly. Examples of these indicators are RSI, CCI, ADX KAIRI STOCHASTIC etc.

LAGGING INDICATOR: Are the indicators which generates signal after trend has materialized. Their signal to buy or sell lags just a bit of market movement. It acts after price action. It gives confirmation about unfolding trend is real. Examples of these indicators are MACD, EMA, SMA etc.

Now I will show you method to use combination of leading indicator RSI

Developed by J. Welles Wilder, the Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price movements. RSI oscillates between zero and 100. Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30.

Lets see how to use RSI with price action.
As the RSI reaches the overbought or oversold territory wait for the price action to confirm signal. As RSI reaches overbought territory then wait to see candle closes below latest swing low. Here calculate the risk reward ratio. As stop loss comes far away then don't enter into trade. Enter only if stop loss is within 20 pips and that instrument can give profit of 40 pips. Because as we know every time trade can't go right so it should be our motto whenever we get profit it should be double of your loss. Below is the chart which shows entry point and stop loss with RSI confirmation.

You can see there is second time RSI reaches overbought territory and price action confirmation is also there, but I haven't given it entry point because stop loss comes far away greater than 40 pips. Below is a chart for entry into long trade.

Next method is of combination of MACD and price action.

Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.

In this method we will check if the MACD line has crossed above histogram and value of MACD turns positive. Price action also confirms entry. Rule is same enter only when stop loss comes within 20 pips.

For short trade rules are MACD line should cross below histogram MACD value should turn negative and before price action method also confirms entry.

Third method is about Bollinger Band indicator.
BOLLINGER BAND: A Bollinger Band, developed by famous technical trader John Bollinger, is plotted two standard deviations away from a simple moving average. We don't need to into nitty-gritty of indicator as we have got the software to plot it for us.
In this trade set up as the prices touches the upper band of Bollinger band wait for price action to confirm sell trade. As soon as candle closes below latest swing low and stop loss will be latest swing high.

Similarly buy trade as soon as the prices touch the lower band wait for price action confirmation. As the candle closes above latest swing high enter into buy trade. And stop loss will be latest swing low.

Hi friends above all comes the money management, our motto should be profit should always be more than loss. So we can do one modification in our each trade. As our trade goes right we can keep moving above our stop loss ind increasing our target. Below is the system where I will show how to decrease stop loss.

On above trade we have got opportunity to decrease stop loss and remain in trade to get maximum profit. This system of trailing stop loss is widely know but not much fallowed as more often than not we are content with whatever profit is coming on the first move of our trade. We start to think why risk the earned profit but from experience I have learned it's better to wait till the full reversal of the trend as many a times currency pairs remain in same trend for many days and just because we closed our trade early we miss out on the large profit.
As a trader we should cultivate discipline, patience, persistence, courage and willingness to learn new things again and again. Somewhere I had read a very motivating quote which read as fallows;

The universe doesn't give you what you ask for with your thoughts; it gives you what you demand with actions
- Dr. Steve Maraboli
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