Why are indicators so important? Well, they give you an idea of where each market’s price might go next. This is what we want to know as traders. Where is the price going to go? So, we can position ourselves to take advantage of the move and earn profit.
As a trader, it’s your job to understand where the market might go and be prepared for any eventuality. You don’t need to know precisely where the market will go, but understand the different possibilities and be positioned for whichever materializes.
Some traders intentionally apply multiple indicators of the same type, hoping to find confirmation for an expected price move. In reality, however, multicollinearity can make other variables appear less important and make it challenging to evaluate market conditions accurately.
To avoid the problems associated with multicollinearity, traders should select indicators that work well with, or complement, each other without providing redundant results. This can be achieved by applying different types of indicators to a chart.
We will use a momentum indicator, trend-following indicator, and volume indicator that support and complement each other.
For our strategy, you must use three technical indicators to trade successfully. These indicators include the Relative Strength Index, Bollinger Bands, and On Balance Volume. Collectively, these indicators account for the trend, momentum, and volume aspects of trading that all traders should pay close attention to.
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