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Best Forex Indicator Combination: RSI, CCI and MACD

Author: Consultant Finmaxfx

There are many trading strategies that are based on a reversal approach. However such periods when the current trend changes direction are not so often. What traders should do in a period of a slow trend? How to determine whether the price is going to continue sideways consolidation range or is it getting ready for a breakthrough? These are exact questions to answer with the help of this trading technique.

How to Combine Different Indicators?

Relative Strength Index and MACD is a well-known pair of technical indicators used together to determine reversal points. Such observations are usually focused on divergence when the price moves in the opposite direction to both indicators. However, the combination of three indicators with Commodity Channel Index can be used to identify periods before a sharp and sustainable price action.

The RSI oscillates between zero and 100. Traditionally the RSI is considered overbought when above 70 and oversold when below 30.

The only condition is that all of the three indicators have to be positive (RSI above 50, MACD and CCI above 0) for long positions and negative (RSI below 50, MACD and CCI below 0) for short ones. It’s worth noticing that default settings have to be modified, as this strategy works best on short-term timeframes, the 30-minutes chart is the perfect one. That's why RSI period has to be changed to 10 instead of standard 14, CCI 14 and MACD 12, 26, 9.

How to Use Combination: RSI, CCI and MACD

Any currency pair could be chosen for Combination Trading Strategy, however, it’s preferable to use more technically correct pairs, especially majors such as EUR/USD, GBP/USD and USD/JPY. Although the number of fake signals is comparatively small, the strategy also works well for cross-rates like GBP/JPY and AUD/JPY. Slow-moving pairs like EUR/GBP are not suitable for this strategy though.

If you like this strategy, you might also be interested in this MACD RSI Strategy

Important Rules

Exit rules are quite simple as the main indicator here is CCI. All you need to watch is the moment when CCI crosses zero levels in the opposite direction and close the current position manually by the market price. So, for example, long positions have to be closed when CCI crosses zero levels, coming into the negative territory after being positive, i.e. upside down. Short positions are usually closed when CCI comes above zero from negative territory, signalling the end of the bear momentum.

Stop-loss order has to be chosen for any particular asset, as different currency pairs usually are vulnerable to several levels of volatility. A standard stop-loss order for EUR/USD on 30-minutes timeframe is equal to 20 pips. But it can be enlarged or decreased depending on money management rules applicable to any particular trading system and depth of the account balance. Anyway, targets have to be at least twice larger than stop-loss orders. That’s a common rule for any positions opened.

Example of using RSI, CCI and MACD in combination:

See also: