The indicators are designed to help in finding the best entry points. However, nothing is perfect and it is quite common that they give a signal with a slight delay. Thus, it is not a bad idea to get confirmation of the signals received by using another indicator.
Today’s strategy I would like to describe connects three indicators. They are the Simple Moving Average, the Relative Strength Index, and the Moving Average of Convergence and Divergence.
A strategy combining the SMA, the RSI, and the MACD
How does it work?
The main indicator is the RSI. A trader will follow its line and check when it crosses the 50 levels. The SMA is showing whether the price is over or under the average rate for a certain number of periods. Just check whether the price bars form under or over the SMA line. The second filter used in our strategy is the MACD indicator. It provides quite powerful signals at the time of crossing the baseline.
How to set up the indicators
You have to be logged in to your IQ Option account. Choose the asset, set the chart, and then click on the indicators feature icon. You have to add each indicator separately. To the needs of our strategy leave the default settings for all three indicators.
Signals for opening UP trades at IQ Option
Several conditions have to be met to open a buy trade.
- The line of value 50 in the RSI window has to be crossed from below.
- The price bars have to develop above the SMA10 line.
- The two lines of the MACD indicator have to intersect under the 0 line.
When all the above demands are fulfilled you can enter a UP trade for the duration of the next candlestick.
Signals for opening DOWN positions on the IQ Option platform
The following rules apply for opening a short trade:
- The RSI 50 line is crossed from above.
- The price bars develop under the SMA10 line.
- The MACD lines intersect each other over the 0 lines.
Only then you can successfully open a sell position.
Final thoughts
The signals received from three indicators together are pretty powerful. However, they do not occur often. The crossings on the RSI and the MACD may happen on slightly different candles. The RSI may oscillate close to 50 for a relatively long time. Such signals are not valid. Remember, that for a strategy to work, all three conditions must be met. Waiting for a strong signal requires a lot of patience. But once you have finally got the green light to go, you may be pretty sure it will be a winning trade.
I encourage you to try the strategy on the free IQ Option demo account. Trading there is risk-free, so you get time to learn the strategy well. If you have any questions or doubts, do not hesitate to share them in the comments section down below.
