Learn How to Combine the Price Action with Indicators

Indicators and Price Action is great trading combo

It provides the best from both styles

What is Important for Combining Price Action with Indicators

It is critically important to know what information you should be focused on when you are trading. Finding the best entries by definition means to “select the best or most desirable” entry positions.

How Does Combination of Price Action and Indicators Work?

In Forex terms, traders focus on taking the very best trades from all the currency pairs, rather than just a few. We think traders should know to trade the most available pairs, focusing on every USD, YEN, and GOLD. And the best methods we are about to share have been successful in day-trading as they combine price action and indicators. Read below to learn how to trade this unique approach

Price Action

Multiple time-frame trading

Most traders pick their one-time frame and rarely leave it. Instead, they simply leave their time-frame to go down to lower time-frames to find more trading opportunities. It means they are recklessly hunting for signals on time-frames that they shouldn’t be on. If you don’t see any success with your current chosen method, why not cherry-pick the best time frame for an entry via the multiple time-frame approach? Why not indeed? Multiple time-frame analysis is highly advantageous. We are talking now about pure price action. For one thing, it helps you synchronize the market movements. And by aligning different time-frames, we can efficiently make use of three things:

trend
momentum
selective entry.

Confluence

For many trend traders, having a structure point or some other pullback measurement tool can make a big difference. Looking for a confluence will keep you out of the weak trades and ensure you only take planned trading opportunities. Confluence zones are selected by analyzing:

trend
support and resistance
patterns
historical buyers and sellers
previous swings.

All these things can influence present and future price action. A quick tip is: whenever you are not sure what to look into, try to cherry-pick the confluence.

Trading hours

Cherry-picking the trading hours is another edge you can use to trade the Forex market. But remember — you need to pick the most suitable pair for trading during the same session. I prefer to trade:

EUR and USD crosses during the London session; and
New York Session and JPY pairs during the Tokyo session.

A great tip is that the best movements can be captured during the first three hours of each major session.

Indicators

Pivot Point Indicators

Support and Resistance (S&R) levels are a vital part of any market analysis or chart for several reasons:

History repeats itself: the market uses S&R levels for breakouts and rejections.
Important zones and levels: majors institutions use it
All-rounders: they appear all markets
Different market phases: they show during retracements, trends, ranges and reversals.
Time frames: A higher time frame is more important because a more significant part of the market uses these levels.
Price action: They are essential to understand price pattern reactions

MACD and MACD Patterns

MACD patterns exist as one of the most successful combinations of price action and indicators. To have these patterns on your chart, set your MACD to 5,13,1 and use the default MACD on your MT4 platform.

Inverted Head and Shoulders MACD

Notice the two shoulders and a head bouncing from the support. This is a so-called bullish SHS pattern, aka Inverted Head and Shoulders. Next, you trade the neckline break of the pattern.

Standard Head and Shoulders MACD

Notice the two shoulders and a head rejecting off resistance. This is a so-called bearish SHS pattern, aka Standard Head and Shoulders. You trade the neckline break of the pattern.

Bullish Power Continuation MACD

We can spot the upside continuation easily with this pattern. The sequence which we follow starts with an A point turn to the downside. That is a so-called retracement. If the A breaks with the MACD histogram signal, we have a long trade.

Bearish Power Continuation MACD

We can spot the upside continuation easily with this pattern. The sequence which we follow starts with an A point turn to the upside. That is a so-called retracement. If the A breaks with the MACD histogram signal, we have a short trade.

Waterline Bullish MACD Rejection

Going below the 0 line and turning back up is the trademark of this pattern. Points A and B are major pivot points for this pattern. It is a signal for upside continuation.

Waterline Bearish MACD Rejection

Going above the 0 line and turning back down is the trademark of this pattern. Points A and B are major pivot points for this pattern. It is a signal for upside continuation.

Why is Combination of Price Action and Indicators Important for Forex Traders?

The JPY pairs seem to correlate strongly with equities — particularly AUD/JPY plus USD/JPY with Dax30, Nikkei and SP500 Indices. Why? Basically, the JPY is seen as a reserve currency linked to the risk-on/risk-off sentiment in volatile markets like equities. You should look at equities each day to see which direction they are heading.

What Did We Learn From Combination of Price Action and Indicators?

The general consensus is that if equities are:

bullish, you go Long on the JPY pairs mentioned above
bearish, you go Short on those pairs.

With equities, you must also consider:

whether they are at critical supports or key resistance
the overall direction; and
be aware of the equities market’s open times.

Combining Price Action with indicators is one of the best approaches you might go with. Try to incorporate price action and indicator methods as mentioned above