There’s a certain kind of investor who always “knows” what works.

You have met them.

They appear in every market cycle, armed with a fresh indicator and absolute confidence. They will tell you exactly where the market is going, exactly why it’s going there, and exactly how to trade it.

They will argue about RSI versus MACD like it’s a matter of religion.

They will not test anything.

And that is why they never get very far.

Because the market does not reward opinions. It rewards process.

Somewhere far away from the noise, someone actually sat down and did the work. Fuwang He, in a study titled “The Best Combination of Indicators for the U.S. Stock Market,” took the long road.

Instead of guessing, he tested more than 1,400 different indicator strategies across decades of U.S. stock data. 

No storytelling. No narratives. Just numbers.

What came out isn’t mysterious. It’s not even that surprising. But it is the truth, laid out plainly.

Here are the four best trading indicators, and how to combine them.

The Search for the “Best Indicator”

Every trader starts in the same place.

You open a chart. You add an indicator. Then another. Then a few more. You are looking for clarity, for certainty, for something that tells you what to do without hesitation.

At some point, the chart stops making sense. The signals conflict. The lines overlap. The noise gets louder instead of quieter.

That is usually when people give up or start guessing.

The study took the opposite approach. Strip everything down. Test each tool on its own. Then test how they work together. Measure what actually happens instead of what should happen.

And right away, one indicator rose above the rest.

Bollinger Bands: Where the Market Breathes

If you have ever looked at a chart, you have seen Bollinger Bands. Two lines wrapped around price, expanding and contracting like lungs.

Most traders treat them like boundaries. Price hits the lower band, it must be cheap. Price hits the upper band, it must be expensive.

That is a comforting idea. It is also wrong more often than it is right.

Because markets do not reverse just because they touched a line.

What Bollinger Bands are really showing you is something more subtle. They are showing you when price has moved far away from normal. When it has stretched.

And stretched things do not always snap back immediately.

The traders who struggled with this indicator were the ones who tried to catch the turn. They bought the moment price hit the lower band. They stepped in front of the move.

The traders who succeeded did something different.

They waited.

They watched price move outside the bands. They watched the panic build, or the euphoria take hold. And they did nothing. No trade. No prediction.

Only when price came back inside the bands, when the move began to stabilize, did they act.

That was the signal.

Not the extreme. The confirmation that the extreme had ended.

Think of it like pulling back an elastic band. You do not grab it while it is still stretching. You wait until it starts to snap back.

That simple shift in behavior is what turned Bollinger Bands into the most powerful long-side tool in the entire study. 

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Keltner Channels: The Quiet Discipline

Now imagine the same idea, but calmer.

Keltner Channels look familiar. A center line, an upper boundary, a lower boundary. But they move differently. They are smoother, less reactive, less prone to dramatic swings.

If Bollinger Bands expand and contract with volatility, Keltner Channels glide through it.

They are not asking how far price has moved in a statistical sense. They are asking whether price has moved outside its typical range.

The behavior that worked was the same.

Price moves outside the channel. Traders feel the urge to act. The disciplined trader waits. When price comes back inside, the trade begins.

The difference is in temperament.

Keltner Channels do not chase extremes. They filter them. They reduce noise. They give up some upside in exchange for consistency.

For many traders, that trade-off is worth it.

Because surviving the market matters more than exciting it.

The Moment Everything Changes

Up to this point, you might think the lesson is simple.

Find something stretched. Wait for it to normalize. Take the trade.

That works well on the long side.

Then the market turns.

Shorting: A Different World Entirely

There is a moment, usually after a sharp decline, when traders decide they are going to start shorting.

They bring their favorite tools with them. The same indicators they used to buy dips. The same logic. The same assumptions.

And then they learn, often quickly, that the game is not the same.

Markets rise slowly and fall quickly. Fear compresses time. Weakness feeds on itself.

Mean reversion becomes dangerous.

That is where the study takes a sharp turn.

The indicators that worked best on the short side were not Bollinger Bands or Keltner Channels.

They were trend-following tools.

Vortex: Following the Current

The Vortex Indicator does not care about extremes. It does not look for reversals. It asks a simpler question.

Who is in control?

It measures upward movement versus downward movement and tells you which one is winning.

If downward movement dominates, the signal is clear. The current is flowing lower.

At that point, your job is not to argue. It is to move with it.

That is why Vortex performed so well on the short side. It does not try to be clever. It does not try to call the bottom.

It simply follows the current.

Moving Averages and TRIX: Waiting for Confirmation

Moving averages do something similar, but in a quieter way.

A crossover, where a short-term average moves below a long-term average, does not predict a decline. It confirms that one has already begun.

That is the difference between guessing and trading.

Most traders want to be early. They want to call the top. That instinct is expensive.

The crossover forces patience. It forces you to wait until the trend is already in place.

TRIX takes that one step further. It smooths the data even more, filtering out the noise and focusing on sustained movement.

In a falling market, that matters. There will always be sharp rallies. Moments that look like the end. TRIX helps you ignore them and stay aligned with the bigger move.

The Quiet Power of Saying No

Up to this point, you have seen how individual indicators behave.

This is where most traders stop.

The study did not.

Instead of asking which indicator works best, it asked a better question.

What happens if you only take the best signals?

That is where combinations come in.

The Real Edge: Combining Signals

The structure is simple.

One indicator gives you a potential trade.

Another indicator decides whether you should take it.

That is it.

Bollinger Bands might tell you price has stabilized after a sharp move. But before acting, something like RSI or ADX steps in and asks:

Is there real momentum behind this?

If the answer is yes, you take the trade.

If the answer is no, you walk away.

That single decision, to not take a trade, is where much of the edge came from.

The best combinations in the study all followed this pattern:

• Bollinger Bands + ADX 
• Bollinger Bands + RSI 
• Bollinger Bands + money flow indicators 

They were not adding complexity. They were adding discipline.

The Part That Makes People Uncomfortable

Even the best systems did not win most of the time.

Win rates hovered around 35% to 45%.

That is not a typo.

The edge did not come from being right often. It came from being right when it mattered.

Small losses. Large gains.

That is how compounding works.

It is also why so many traders struggle. They want to be right. The market rewards those who are patient.

One Last Lesson Most Will Ignore

The study even tested these indicators in machine learning models.

You would expect that adding more indicators would improve results.

It did not.

When reduced to just price and volume, performance barely changed.

That tells you something important.

Indicators do not create new information. They organize what is already there.

The edge is not in the tool. It is in how you use it.

The Final Thought

Most traders will read something like this and move on.

They will go back to their charts, add another indicator, and convince themselves they are getting closer.

They are not.

The answer is already in front of them.

Use Bollinger Bands or Keltner Channels to identify stretched conditions and wait for stability.

Use Vortex, moving averages, or TRIX to stay aligned with real trends, especially on the short side.

Combine signals. Filter aggressively. Accept that you will be wrong often and focus on being right when it counts.

And above all, stop guessing.

Start testing.

That alone puts you ahead of most of the market.