uTrade Algos

How to Maximize Returns On Investment?

April 5, 2023
Reading Time: 8 minutes

This comprehensive trading guide would take you to an intermediate level when it comes to Trading. Not only will you understand the working of various Technical Indicators but it will also enable you to use several indicators in combination, thus being more certain when the trading system generates a signal and to be able to bet your money with more conviction!

Knowing what indicators are, how to use them, and what is the best combination of technical indicators can dramatically improve your chart reading skills. If you use a technical indicator incorrectly, it can lead to inaccurate price interpretation and, subsequently, to bad trading decisions.

Technical indicators make it easy for you to identify current price trends and predict where prices will move in the future. By developing effective technical analysis strategies, you can increase the amount you earn each trading day.

However, while all technical indicators are useful, they do have their own set of weaknesses. If you only use a single indicator to monitor the market, there may be certain price trends (or hazards) that you aren’t noticing.

By combining multiple technical indicators into a single trading strategy, you can potentially limit your risks and predict trends more accurately.

In this article, we will be discussing the best practices on how to create a multi-indicator strategy. A multi-indicator strategy should avoid being redundant and should use the best combination of trading indicators in a meaningful way.

For novice traders, a multi-indicator strategy carries the risk of delivering redundant outputs because many times traders use indicators that show the same type of information. To avoid being trapped by such trading misconceptions, you need to understand that technical indicators can be classified into three groups:

Types of Technical Indicators
Trend Following Indicators

These indicators allow you to determine whether an asset is currently overbought or oversold. Many trend following indicators, such as Bollinger Bands, attempt to create a clear ‘channel’. A clear channel will tell you whether prices are close to breaking out or returning to normal.

Momentum Indicators

Momentum indicators such as the Relative Strength Index (RSI) allow you to determine the direction and strength of a current price trend. RSI measures if the current price is oversold or overbought. As an asset begins to build momentum, opening a new position will become less risky. Looking at moving average indicators also helps you gauge momentum.

Volatility Indicators

These show how much the price of the asset is changing in a set period. The price has to be volatile in order for a trader to be able to trade it, but high volatility is also associated with higher risk.

Now that you understand the different types of indicators, let’s understand how to combine the various technical indicators to come up with a winning trading strategy.  In fact, using the various indicators, you can build popular combinations that you can use to build advanced strategies on uTrade Algos.

Different Trade Strategies
MACD Combinations

It can be used together with other trading indicators to identify trading opportunities.

It is commonly combined with RSI, Stochastic, supports, and resistances.

Let’s give examples of how you can combine the MACD with other trading indicators.

MACD + Stochastic RSI

The stochastic RSI indicator helps traders determine when a security is overbought as well as when it is oversold. We have already discussed these indicators in detail, you can check our previous blogs for their detailed description.

The MACD is a trend following indicator that helps traders know the relationship between 26 and 12 days EMA that are used to calculate the MACD and the signal lines.

The stochastic RSI indicator oscillates between 0 and 100, with positions below 100 being considered oversold and positions above 80 being considered overbought.

The MACD indicator, on the other hand, gives traders buy and sell signals through crossovers between its MACD line and the signal line.

When the MACD line goes above the signal line, the indicator sends a buy signal.

When the MACD line goes below the signal line, it gives a sell signal.

Here is how you can combine these two indicators:

MACD gives a buy or sell signal through a crossover of its MACD and signal lines.

Stochastic levels rise above 80 (overbought, sell signal) or below 20 (oversold, buy signal).

The two indicators give the same type of signal (buy or sell).

Consider the chart given below:

Algo Trading MACD and Stochastic RSI Indicators

The above chart shows how you can use the MACD and stochastic RSI indicators to run a trade.

You should sell the trade at the position marked as ‘Sell’ on the chart.

But, what is happening with the indicators at that time?

This has been shown using two bold blue circles on the indicators section of the chart.

During that time, the MACD lines make a bearish crossover, that is, the MACD line begins to move below the Signal line.

The Stochastic RSI indicator was at an overbought position (above 80) at that point.

A combination of these two indicator signals sends a sell signal.

So, it’s possible for a trader to combine the stochastic and the MACD indicators to run a successful trade.

MACD + RSI    

The RSI technical indicator is a momentum indicator that measures the recent price changes so as to determine if the current price is oversold or overbought.

It oscillates within a range of 0 and 100 and sets the overbought and oversold positions.

The RSI overbought level is set at 70, while the RSI oversold position is set at 30.

So, all RSI positions above 70 are considered overbought and all positions below 30 are considered oversold.

They work similarly as the previous case:

MACD sends a buy or sell signal after a crossover of both of its lines, the MACD and signal lines.

All RSI levels move above 70 (overbought) or below 30 (oversold).

The two indicators give the same type of signal.

Consider the chart given below

Algo Trading MACD and RSI Indicators

The above graph shows the RSI and the MACD indicators added to a single chart.

You should enter a sell trade at the position marked as ‘Sell’ on the chart.

If you look at the RSI indicator, it is above 70. This means that it’s in an overbought position.

This has been shown by the bold black circles on the indicator.

At the same time, the MACD indicator makes a bearish crossover.

The MACD line of the indicator crosses the signal line and begins to move below it.

This generates a sell signal. This is a good time for you to sell the security.

The price action entered a bearish move from that time, and this bearish move continued for some time.


The DMI indicator is used to measure the strength of positive and negative trends.

The indicator sends sell and buy signals after a crossover happens between the +DI and the –DI lines.

When the +DI crosses the –DI in an upwards direction, it’s an indication that the price of the forex pair is increasing. This generates a buy signal, meaning that it’s a good opportunity for you to enter a long position.

When the +DI crosses the –DI in a downwards direction, it’s an indication that the price of the forex pair is decreasing. Hence, it’s a good opportunity for you to enter a short position.

You can combine the DMI and the MACD indicators to come up with a trading strategy that works as follows:

MACD generates a buy or sell signal after a crossover of both of its lines, that is, the MACD and the signal lines.

DMI generates a buy or sell signal after a DMI crossover.

The signals are generated at the same time or at the time of the ‘Keep signal for x candles’.

Consider the chart given below:

Algo Trading MACD and DMI Indicators

The above graph shows the DMI and MACD indicators added to a chart.

You should buy the security at the position marked as ‘Buy’ on the chart.

During this time, the +DI line of the DMI indicator crosses the –DI line of the same indicator in a bearish direction.

This is an indication that the price of the security is decreasing, hence, it’s a good time for you to enter a short position.

The MACD indicator also gives a similar signal.

RSI Combinations

The RSI (Relative Strength Index) is a momentum and leading indicator at the same time. It is loved by most traders because it is easy to use. The RSI technical indicator shows the possible overbought and oversold positions in the market.

The OBV (On-Balance Volume) indicator, on the other hand, works based on the idea that both the volume and the price activity are equally important. It combines both the price and the volume so as to show you the total amount of funds that go in and out of the market.

These two indicators can be combined to come up with a great trading strategy.

Consider the chart given below:

Algo Trading RSI and OBV Indicators

  • The above graph shows the RSI and OBV indicators combined in a single chart.
  • You should enter a short position at the point marked as ‘Sell’ on the chart
  • The RSI indicator is above 70 at this point, which is a signal that the forex pair is overbought.
  • At the same time, the OBV indicator begins to make a bearish move.
  • This has been shown by the two bold black circles on the chart.
  • These two signals are an indication that the price action is about to begin a bearish move, meaning that it is time for you to enter a short position.
  • The price began to make a bearish move from that position.
  • This is also the same trend shown by both indicators.
  • At this point, the RSI indicator is below 30, which is a signal that the security is oversold.
  • At the same time, the OBV indicator is beginning to move upwards, which is an indication that a bullish trend is beginning in the market.
  • At this point, you should exit your short position and enter a long position.

This way, you will benefit from the bullish move that results from the price action.

RSI + Bollinger Bands

Bollinger Bands shows the periods of high and low volatility of the asset. The more wide apart the bands are, the higher the volatility and the stronger the movement is.

With these two indicators combined, a buy signal is received when candlesticks cross the bottom line of BB and the RSI line crosses the oversold level and starts moving up. A sell signal is received when the chart crosses the upper band and the RSI is in the overbought level, starting to reverse down.

Algo Trading RSI and Bollinger Bands Indicators
SMA + Stochastic RSI

As we have already discussed Stochastics RSI above and SMA is a simple moving average, it can be said that this is a basic tool which helps a trader see the real picture of the market direction.

Using these two indicators together, the following signals might be indicated. When the market breaks the SMA line from below upwards and the blue line of the stochastic RSI crosses the red line upwards, it may be a sign of an upward trend. A signal of a downward trend is received when the market crosses the SMA line from above downwards and the stochastic RSI shows the blue line crossing the red line downwards.

Algo Trading SMA and Stochastic RSI Indicators
ATR + Parabolic SAR

ATR is a volatility indicator, measuring how volatile the market is.

Combining ATR with parabolic SAR (a trend indicator)  may help the trader find entry points during a trending market while setting potentially more accurate ‘Take Profit and Stop Loss’ levels.

While combining these indicators, one may watch for the signals given out by parabolic SAR.

A buy signal is received when the dotted line is below the price chart.

A sell signal is received when the dotted line is above it.

A possible entry point is marked when the parabolic moves from one position to another (for instance, it changes from being above the candle chart to moving below it).

Algo Trading ATR and Parabolic SAR Indicators

We demonstrated how to combine and take meaningful answers from technical tools which in turn help us determine trends, future directions, entries and exits and other necessary market data.

Is everything that easy OR Are we living in a perfect world?
Of course not!

The first problem is that alerts coming from the market are sometimes wrong. Also, more is not always better, but be careful to also avoid indicator redundancy and pick combinations that show complimentary information to make a stronger entry or exit in your trading strategies.


Frequently Asked Questions

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uTrade Algo’s proprietary features—advanced strategy form, one of the fastest algorithmic trading backtesting engines, and pre-made strategies—help you level up your derivatives trading experience

The dashboard is a summarised view of how well your portfolios are doing, with fields such as Total P&L, Margin Available, Actively Traded Underlyings, Portfolio Name, and Respective Underlyings, etc. Use it to quickly gauge your algo trading strategy performance.

You can sign up with uTrade Algos and start using our algo trading software instantly. Please make sure to connect your Share India trading account with us as it’s essential for you to be able to trade in the live markets. Watch our explainer series to get started with your account.

While algo trading has been in use for decades now for a variety of purposes, its presence has been mainly limited to big institutions. With uTrade Algos you get institutional grade features at a marginal cost so that everyone can experience the power of algos and trade like a pro.

On uTrade Algos, beginners can start by subscribing to pre-built algos by industry experts, called uTrade Originals. The more advanced traders can create their own algo-enabled portfolios, with our no-code and easy-to-use order form, equipped with tons of features such as robust risk management, pre-made algorithmic trading strategy templates, payoff graphs, options chain, and a lot more.

From single-leg strategies to complex portfolios, with upto five strategies, each strategy having up to six legs, uTrade Algos gives one enough freedom to create almost any auto trading strategy one likes. What’s more, is that there are pre-built algos by industry experts for complete beginners and pre-made strategy templates for those who want to try their hand at strategy creation.

An interesting feature that uTrade Algos is bringing to the table is a set of pre-built algorithms curated by top-ranking industry experts who have seen the financial markets inside out. These algorithms, called uTrade Originals, will be available for subscribers on the platform.

Algos have the capability to fire orders to the exchange in milliseconds, a speed which is impossible in manual trading. That is why traders leverage the power of algo trading to make their efforts more streamlined and efficient. You can try uTrade Algos for free for 7 days!

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Knowledge Centre & Stories of Success

In the world of algorithmic trading, measuring performance goes beyond simply looking at profits. Here strategies are executed at lightning-fast speeds and hence, metrics beyond profits are needed to assess the robustness of it all. Among the various metrics, the PnL aka Profit and Loss is a critical metric that sheds light on the effectiveness of your algo trading strategy. 

Algorithmic trading has become increasingly popular among traders looking to automate their strategies and capitalise on market opportunities. With the rise of algorithmic trading platforms like the uTrade Algos algo trading app, traders have access to powerful tools and technologies to execute trades with precision and efficiency. However, to make the most of these tools, it's essential to optimise your algorithmic trades effectively. Let us explore seven essential tips for optimising your algorithmic trades using the app.

In algorithmic trading, where seconds can make a difference, having effective exit parameters is crucial for managing risk and improving the chances of returns. Global exit parameters serve as predefined rules or conditions that trigger the exit of a trade, ensuring disciplined and systematic trading. In this guide, we'll find out about the concept of global exit parameters, explore their significance in algo trading, and understand how they function in real-world trading scenarios.

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