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  "transcribedText": "Knowing how to combine technical indicators in the right way can dramatically increase your chances of success in trading. On the other hand, using the wrong ones can result in inaccurate price interpretation and making bad trading decisions. Technical indicators are heuristic or mathematical calculations based on the price, volume, or open interest of a security or contract used by traders who follow technical analysis. There are two basic types of technical indicators, overlays and oscillators. Overlays are technical indicators that use the same scale as prices and they are plotted over the top of the prices on a stock chart. Examples include moving averages and Boiliger bands. Oscillators are technical indicators that oscillate between a local minimum and maximum and they are plotted above or below a price chart. Examples include the stochastic oscillator, MACD, or relative strength index. Technical indicators can also be divided into four groups. First group is the trend following indicators. These technical indicators measure the direction and strength of a trend by comparing prices to an established baseline. They're sometimes called oscillators because they tend to move between high and low values like a wave. These indicators include moving averages. They're used to identify trends and reversals as well as to set up support and resistance levels. Parabolic stop and the reverse or parabolic SAR. This indicator is used to find potential reversals in the market price direction. Moving average conversions diversions. This tool is used to reveal changes in the strength, direction, momentum, and duration of a trend in a stock's price. The second group includes momentum indicators. These technical indicators may identify the speed of price movements by comparing the current closing price to previous closes. The examples of these can be stochastic oscillator. This tool is used to predict price turn in points by comparing the closing price to its price range. Commodity channel index or CCI. This is an oscillator that helps identify price reversals, price extremes, and trend strength. And the relative strength index or RSI, this technical tool measures recent trading strength, velocity of change in a trend, and magnitude of the move. The third group includes volatility indicators. These technical indicators measure the rate of price movement regardless direction. For example, Boilinger bands that measures the highness or lowness of price relative to previous trades. Average true range that shows the degree of price volatility. Standard deviation that's used to measure expected risk and to determine the significance of certain price movements. And the fourth category is volume indicators. These technical indicators measure the strength of a trend based on volume of shares traded. The examples of these can be Chaikin oscillator. This tool monitors the flow of the money in and out of the market which can help determine tops and bottoms. Unbalanced volume or OIBV, it attempts to measure level of accumulation or distribution by comparing volume to price. Volume rate of change indicator that highlights increases in volume. These normally happen mostly at market tops, bottoms, or breakouts. Traders often use different technical indicators when analyzing a security. With thousands of different options, traders must choose the indicators that work best for them and familiarize themselves with how they work. The most common mistake I see new traders make is they combine different indicators from the same group that show the same information on the charts. For example, they combine the MACD, stochastic, and the RSI. If you take a closer look, you can tell that they all move in in the same direction. This is definitely not helpful because we're getting the same information about the price movement. The mistake number two is using only trend indicators. For example, using a parabolic SAR, a moving average, or SSL channel at the same time. And again, the reason this is not a great idea is because these indicators have the same nature. Notice when the parabolic SAR shifts below the price action, the SSL channel also gives a long signal. And if they both give a signal at the same time, it doesn't mean that the trend is stronger. You normally want to combine the indicators that are not in the same group because this mistake can lead to inaccurate price interpretations and making bad trading decisions. And the third mistake I see new traders make is they use over three indicators. For example, you decided to build your own trading strategy and you started with three indicators. Sometimes they give you pretty accurate signals, but sometimes you encounter losing trades. And now you're thinking about the way how to eliminate these losing trades. And here you have two options. You can either tweak the settings on these indicators, or you can add more tools to the chart. Here you have a combination of a baseline, two line cross, zero cross, and the volume indicator. And if we take a look at the chart, we see that some of those bad signals got eliminated. But it doesn't necessarily mean that the strategy got better because some of the winning trades got eliminated as well. So, yeah, by adding too many indicators to the chart, you first of all get confused, and second, you get less trade entries because the more tools you have on a chart, the harder it is for them to align properly so that they give you a valid trade entry. So my recommendation would be to use three maximum four indicators. So what are the best combination of indicators you can use for maximum chances of success? This is a really good question and now let me give you an answer. The first combination I recommend is using a trend following indicator plus a momentum indicator. For example, it's always a good idea to use an exponential moving average with an RSI indicator. There are multiple ways how you can enter the trade. First of all, you can use the RSI with the gore to find divergences, or you can simply follow the trend and only take long positions if the price action is closed above the exponential moving average, and the RSI purple line is above the yellow line. The second combination is to use the trend following indicator with a volume indicator. For example, you can use the SSL channel with a volume spread for VSA, and the rules for entering a long trade would be simple. First of all, you're waiting for a new bullish cross on a SSL channel indicator. This means that the green line crosses above the red line. And the second condition will be to have the volume bar colored in yellow or red. Obviously, this strategy is not complete yet because you need to add at least one more indicator to the chart. For that, you can try to add a zero line cross indicator. You can try using something like a check-in money flow or CCI. Obviously, the SSL channel will be your first confirmation indicator, and the CCI will simply filter out bad signals. And the last combination would be to use the volatility plus a momentum indicator. For example, you can use a combination of Boilinja bands and STC. There are multiple trading strategies you can use with these indicators. The most popular one would be to take long positions when the price action breaks above the Bollinger Bands, and the STC indicator is green color. You can place your stop loss at the recent swing low. Exactly opposite is true for short trades. You only take a sell position when the price action breaks below the Bollinger Bands and the STC is red color. A lot of beginners think that this is only a matter of time when they find a holy grail strategy or the strategy that will simply work one hundred percent of the time. But the truth is, such strategy does not exist. Trading is a probability game. The ones who understand this never get upset about losing streak because they know losses are the part of the game and our goal is to find a strategy that would minimize them as much as possible. Okay traders, I hope you found this video useful. By the way, if you're on a mission to build a profitable trading strategy but you don't know what indicators to use, check out this playlist right here. This is literally a collection of the best indicators I have found so far."
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