Written from my own trading journal — the mistakes are mine, and so are the fixes.
When I started learning the markets in 2016, there was almost nothing available. No structured courses, no clean YouTube playlists, no proper Indian market content. I collected whatever I could find — random trading books, PDFs downloaded from forums, screenshots shared in Telegram groups. And like almost everyone, the very first thing I learned about was indicators.
That is where the trouble started. Once you open the indicator list on any charting platform, you find hundreds of them. RSI, MACD, Stochastic, CCI, ADX, Bollinger Bands, SuperTrend, Ichimoku, Williams %R, MFI, OBV, Parabolic SAR. Each one has a good-looking backtest somewhere on the internet. So I did what a beginner does — I used all of them.
My chart looked like an engineering diagram. Three panels below the price, two overlays on top of it. And I lost money consistently for a long stretch.
So does that mean indicators do not work? No. It means I was using them wrong. Let me explain exactly what changed.
Why stacking 10 indicators actually made me worse
Here is the thing nobody told me in 2016: most indicators are calculated from the same two inputs — price and volume. If you put RSI, Stochastic, CCI and Williams %R on one chart, you have not added four opinions. You have added one opinion, repeated four times in four different colours.
This creates a false sense of confirmation. When all four momentum oscillators turn up at the same time, your brain reads it as "four indicators agree, this is a high-probability trade." In reality they were always going to agree, because they are measuring the same thing.
Here is how the indicators I used actually group together:
| What it measures | Indicators in this group | How many you need |
|---|---|---|
| Trend direction | EMA, SMA, SuperTrend, Ichimoku, Parabolic SAR | One |
| Momentum / overbought-oversold | RSI, Stochastic, CCI, Williams %R, MFI | One |
| Trend strength / momentum shift | MACD, ADX, ROC | One |
| Volatility | Bollinger Bands, ATR, Keltner Channel | One, optional |
| Participation | Volume, OBV, VWAP | Volume itself is enough |
Pick one from each row and you have covered everything an indicator can possibly tell you. Pick four from the same row and you have just made your screen busier.
There was a second problem, and it hurt more than the first one. The more indicators I added, the fewer trades I took — and the ones I did take, I entered late. If you wait for eight indicators to line up perfectly, either the move is already over, or you sit out for weeks. Then frustration builds, and you jump into a random trade with no setup at all. That cycle emptied my account faster than any bad indicator ever did.
Leading vs lagging: the part I understood too late
An indicator is not a signal. It is a probability estimate built from past data. Every single one of them can fail, and they fail in predictable ways depending on which type you are using.
| Leading (RSI, Stochastic) | Lagging (EMA, MACD) | |
|---|---|---|
| What it tries to do | Warn you before the turn | Confirm the turn after it happens |
| Main strength | Early entry, better risk-reward | Keeps you on the right side of the trend |
| How it fails | False signals in strong trends — RSI can stay above 70 for weeks | Late entry, whipsaws in sideways markets |
| Where it works best | Range-bound and pullback setups | Trending and breakout setups |
Once I saw it this way, the answer became obvious. You do not need more indicators. You need one leading indicator to time the entry and one lagging indicator to confirm the direction — and price action to make the final call.
The three indicators I actually use today
After years of testing and cutting, my chart is down to three. That is it. Everything else I removed.
1. EMA — for direction (lagging)
I use the 20 EMA, 50 EMA and 200 EMA on the daily chart. This one decides whether I am even allowed to look for a buy.
- Price above 200 EMA — long side only. Below it, I skip the stock entirely.
- 20 EMA above 50 EMA — trend is healthy and I can look for pullback entries.
- The 20 EMA and 50 EMA also act as my dynamic support zone in a running trend.
The 200 EMA filter alone removed a huge chunk of my losing trades. Most of my worst losses in the early years were bottom-fishing stocks in clear downtrends because "RSI was oversold."
2. RSI (14) — for timing (leading)
I do not use RSI the textbook way. Buying below 30 and selling above 70 is exactly what got me into trouble, because in a strong uptrend RSI simply refuses to come down to 30.
What I actually watch:
- The 40–60 zone. In an uptrend, RSI usually pulls back to 40–50 and bounces. That is my entry zone, not 30.
- RSI above 60 with rising price — strength, not a sell signal.
- Divergence. Price makes a higher high but RSI makes a lower high — momentum is fading and I tighten my stop or book partial profits.
- Trendlines on RSI itself. A break of the RSI trendline often comes before the price trendline breaks. This is my single most useful RSI technique.
I have written a full post on the RSI and price trendline strategy with chart examples, so I will not repeat all of it here.
3. MACD (12, 26, 9) — for momentum shift (lagging)
MACD is my confirmation tool, never my trigger. I mainly look at two things:
- Histogram turning — when red bars start shrinking after a pullback, momentum is shifting back up.
- Zero-line position — MACD line above zero means the medium-term trend is intact. I prefer my entries there.
I ignore most MACD crossovers on their own. On Indian midcaps and smallcaps, MACD crossovers in a sideways phase will chop your account into pieces.
And the fourth thing, which is not an indicator at all
Price action. Structure, support and resistance, volume, and the candle at the level. This is what makes the final decision, and honestly it carries more weight than the three indicators combined.
The indicators only tell me where to look. Price tells me whether to click.
1. Is price above the 200 EMA? If no — skip.
2. Is the stock at a meaningful level — support, breakout retest, or 20/50 EMA zone?
3. Is RSI in the 40–60 pullback zone, or breaking an RSI trendline?
4. Is the MACD histogram turning in my favour?
5. Is there a clean candle at the level with above-average volume?
6. Can I place a stop loss that keeps my risk at a fixed, pre-decided amount?
All six must be yes. If any one is a no, I do not take the trade.
What my backtesting showed
Before I trusted this setup with real money, I went back through daily charts and logged the setup manually. Screening the list, marking entry, stop and target, and recording the result exactly as I would have traded it.
| Approach | Trades taken | Win rate | What killed it |
|---|---|---|---|
| 8–10 indicators (2016–2017) | Too many — no filter | Poor | Late entries, revenge trades, no fixed stop |
| EMA + RSI + MACD + price action | Far fewer, but clean | Consistently positive | Still fails in sideways and gap-down news days |
The important part is not the win rate. It is that the losses became small and predictable, because every trade had a defined stop before entry. With 10 indicators I never had a clean invalidation point — when the trade went against me, half the indicators still looked fine, so I kept holding.
Where these three still fail — honestly
I want to be clear about this, because most indicator posts only show the winners.
- Sideways markets. EMAs flatten, MACD crosses back and forth, RSI hovers around 50. This setup produces nothing but small losses in a range. My fix: when the 20 and 50 EMA are tangled together, I simply stop trading that stock.
- News and results gaps. No indicator on earth sees a gap-down coming. My fix: position sizing, and avoiding fresh entries right before a result date.
- Illiquid counters. On low-volume stocks the indicators are technically valid but you cannot exit at your stop price. This is a real risk in the SME segment.
- My own patience. The setup filters out most days. The hardest part is not the strategy — it is sitting still when nothing qualifies.
So — how many indicators should you use?
Two to four. Not more. And they should measure different things.
| Trader type | Suggested set |
|---|---|
| Complete beginner | Price action + volume only. Add indicators after you can read a chart without them. |
| Swing trader (my style) | EMA (20/50/200) + RSI (14) + MACD + price action |
| Intraday trader | VWAP + one momentum indicator + volume |
| Positional investor | 200 EMA + fundamentals. Indicators matter less as the timeframe stretches. |
Here is the test I use on any indicator before I add it to my chart: if I remove this, do my decisions change? If the answer is no, it goes. That question alone took me from ten indicators to three.
Five mistakes I made so you do not have to
- Treating an indicator as a signal. It is a probability, and it will be wrong sometimes. Plan for that with a stop loss, not with more indicators.
- Using four indicators from the same family. Redundant confirmation is not confirmation.
- Changing settings after every loss. I tried RSI 9, 14, 21, 25. The settings were never the problem — my entry discipline was.
- Ignoring the higher timeframe. A perfect 15-minute setup against a broken daily chart is still a bad trade.
- Not journaling. I only found out which indicators were pulling their weight after I started writing every trade down. Without a journal you are guessing.
The short version
Indicators do work. They just do not work the way a beginner expects them to. They do not predict. They organise information, and they filter out noise so you can look at fewer charts with more clarity.
I lost money in 2016 not because RSI is broken, but because I had no rules, no stop loss, and a chart so crowded that I could always find a reason to enter. Cutting down to three indicators plus price action did not give me a magic system. It gave me something better — a setup simple enough that I can follow it consistently, and clear enough that I know immediately when I am wrong.
Start with price. Add a trend filter. Add a momentum tool. Stop there. Then spend the next six months on the things that actually decide your results: position sizing, stop loss discipline, and patience.
Frequently asked questions
Do indicators work in the Indian stock market?
Yes, the same way they work anywhere — as probability tools, not predictions. The main adjustment for Indian markets is liquidity. On low-volume midcap and SME counters, indicator signals may be technically correct but hard to execute at your intended price.
Which is the most accurate indicator?
There is no most accurate indicator. Every indicator is derived from price, so price itself is always the most accurate input. Indicators are useful for filtering and timing, not for accuracy.
Can I trade with RSI alone?
You can, but you will struggle in trending markets, because RSI stays overbought for long stretches during strong uptrends. Pairing it with a trend filter like the 200 EMA solves most of that problem.
Is MACD better than RSI?
They do different jobs. RSI is leading and helps with timing; MACD is lagging and helps with confirmation. Using them together works better than choosing one.
How many indicators do professional traders use?
Most experienced traders I have come across use very few — often just a moving average and volume. Complexity tends to reduce as experience increases, not increase.
What should a beginner learn first — indicators or price action?
Price action. Learn to read structure, support and resistance, and volume first. Indicators added on top of that understanding are useful. Indicators used instead of it are dangerous.
Disclaimer: This post is for educational purposes only and is not investment advice or a recommendation to buy or sell any security. I am not a SEBI-registered investment adviser. Everything above is a description of my personal trading approach and my own mistakes. Markets carry risk of loss. Please do your own research and consult a qualified adviser before trading.
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