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What is a necessary technical indicator?
What is a necessary technical indicator?

Discover what a necessary technical indicator is and how it works in your trading strategy.

Pete Darby avatar
Written by Pete Darby
Updated over a week ago

A necessary technical indicator should always signal a buy or sell before an order is placed. Let's say you use 3 technical indicators for buying, and you want at least 2 technical indicators to signal a buy before an order will be placed. The technical indicator that you made necessary must always give a buy signal, otherwise, no trade will be opened.


You've made Bollinger Bands a necessary technical indicator, and you've configured that 2 of these 3 technical indicators must signal a buy before a buy order will be placed on your crypto exchange. The other 2 technical indicators that you've configured in your trading strategy are Relative Strength Index (RSI) and Exponential Moving Average (EMA).

Situation 1:

RSI and EMA signal a buy, but Bollinger Bands doesn't. Since Bollinger Bands, as a necessary indicator, is not showing a buy signal, no buy order will be placed.

Situation 2:

EMA and Bollinger Bands show a buy signal, but RSI doesn't. In this case, since your necessary indicator is signaling a buy, and there's a second technical indicator signaling a buy, a buy order will be placed.

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