Technical analysis indicators are very helpful in trading. Sometimes it is best to combine a few to build a reliable trading strategy. This way you can receive a very strong system that will give accurate signals to open trading positions. Today, I would like to introduce you to the strategy based on three indicators, the MACD, the Alligator, and the RSI.
Key Takeaways🔑
| →Combining MACD, Alligator, and RSI can provide a robust trading strategy with high accuracy. |
| →Each of these indicators brings unique insights: MACD identifies trend momentum, Alligator defines tradable trends, and RSI measures price movement changes and speed. |
| →Always use sound money management strategies and control emotions while trading to minimize risk. |
Contents
Three indicators that are used for Fixed Time Trades
The Moving Average Convergence Divergence
The MACD belongs to the group of leading indicators. Gerald Appel has invented it in the 1970s. It is a very popular indicator that shows whether a trend is picking momentum or not. The traders love it for its simplicity and flexibility. It can be successfully applied in different markets for financial derivatives.
The Alligator
In contrast to the previous one, this indicator can be described as the lagging one. Its inventor’s name is Williams Alligator. His indicator defines tradable trends with high accuracy and this is why it is often used by professionals. It consists of three exponential moving averages.
The Relative Strength Index
This is an oscillator that was developed by J. Welles Wilder. It measures the changes in the price movements as well as their speed. It fluctuates between 0 and 100 value and helps to identify the oversold and overbought areas. The asset is considered to be oversold when the RSI drops below the value of 30 and overbought when the indicator rises above 70.
The mixture of three indicators
In this strategy, the MACD is joined with a lagging Alligator to get a clearer picture of what is happening in the market. Additionally, there is the RSI to make sure the signals provided by the system are very powerful. It will filter the fake signals and leave the valuable ones. The win-rate of this system was recently measured at 81%.
Indicators settings
The MACD should be set for 12, 26, and 9 (default settings).
The Alligator – 13, 8, 5 (default settings).
The period of the RSI should be selected for 30.
Using the system that combines three different indicators on the Olymp Trade platform
The system that combines the MACD, the Alligator, and the RSI can be used for any currency pair, cryptocurrencies, commodities, or stock indices. You can use it in any time frame. You can trade using 1m, 5m, 15m, or higher chart time frame. Choose the one you are comfortable with.
Opening fixed time trade for a price increase
Three indicators work together and you must watch all of them. Before entering the trade make sure all the conditions are met. And what are the conditions for opening a long position?
- The closing of the candle should take place above all three lines of the Alligator.
- The MACD histogram is above the value of 0.
- The line of the RSI indicator moves above the middle line of the value 50.
Opening fixed time trade for a price decrease
The rules for opening fixed time trade for a price decrease are as follows:
- The price bars are developing below the EMAs that create the Alligator indicator.
- The MACD histogram is under the 0 line.
- The line of the RSI moves beneath 50.
Things to remember
Do not enter multiple trades simultaneously. Open one position at a time.
You can hold the position open for as long as the chart time frame multiplied by 5. With a 1-hour chart, you can keep the position open for 5 hours. With a 5-minute time frame, you can keep it around 25 minutes.
Advantages and disadvantages of the strategy that combines the MACD, the Alligator, and the RSI
Advantages
The strategy described today can be used in various markets. Moreover, using it is quite simple. Nevertheless, the signals provided are really powerful. Naturally, you have to always check whether all conditions are fulfilled. It can generate constant profits from trading the trends.
Disadvantages
There are three indicators involved and you need to watch all of them. It requires a great portion of patience and concentration. You need to observe the chart, sometimes for a long time, before the favorable situation occurs.
Pros and Cons of the Strategy😊🙁
Pros😊:
- Effective: Combining MACD, Alligator, and RSI can offer high-accuracy signals.
- Flexible: The strategy can be used across various markets and time frames.
- Comprehensive: This three-indicator strategy provides a more holistic view of market trends.
Cons🙁:
- Requires vigilance: As it involves three indicators, it requires patience and concentration to monitor all of them.
- No guarantee: Like any strategy, this does not guarantee profits. It’s important to be prepared for potential losses.
- Dependency: Over-reliance on this strategy without considering other factors may lead to suboptimal trading decisions.
Function of Each Indicator in the Strategy📈📉
| Indicator | Function |
|---|---|
| MACD | Indicates trend momentum and potential trend reversals. |
| Alligator | Defines tradable trends with high accuracy. |
| RSI | Measures changes and speed of price movements, and identifies overbought or oversold conditions. |
Summary
Many professional traders believe that trend trading strategies are the most valuable ones. Today, you got to know one of such systems that combines three indicators. The MACD, the Alligator, and the RSI give very satisfactory results and the signals produced by them are extremely strong.
You should always protect your capital and you can do it by applying money management strategies as well as having emotions under control. Taking time to learn these skills will minimize the risk of losing money and improve your chances of conducting profitable trades.
Use the Olymp Trade demo account before you begin investing real money. Keep in mind that these strategies are not guarantees for earning, as no strategy is completely risk-free. Therefore, always be prepared to deal with losses.
I would be happy to hear from you. Share your thoughts about the strategy that combines the MACD, the Alligator, and the RSI in the comments section below.
Good luck!
Quick Q&A Section🔍
- Q: What is the advantage of combining MACD, Alligator, and RSI in a trading strategy?
A: This combination provides a more holistic and accurate view of market trends and trading opportunities. - Q: How does the MACD function in this strategy?
A: MACD indicates whether a trend is gaining or losing momentum, aiding in decision-making. - Q: What does the Alligator indicator do?
A: The Alligator indicator helps in defining tradable trends with high accuracy. - Q: How does the RSI contribute to the strategy?
A: The RSI measures changes and speed of price movements, helping to identify overbought or oversold conditions. - Q: Is the strategy guaranteed to bring profits?
A: No trading strategy can guarantee profits. It’s important to use sound money management strategies and control emotions while trading.