MACD indicator

The MACD is a technical indicator designed for trend trading the markets and as a result, there are many trend trading strategies based on the MACD indicator. In our strategy here, however, we will use a few other indicators in addition to the MACD in order to ensure a higher rate of profitable trades.

Puck si te animas podemos hacer Bactest yo por un par y vos por otro que dices Normal traders would have purchased at this break out but would have resulted in a losing trade.

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In this USDJPY example, the Stochastic and the MACD started to turn before the price closed outside of the band. This is a common occurrence and helps to confirm that the trend is near exhaustion. An example of a short entry and exit on USDJPY 4h chart.

So, whenever the MACD Line crosses 0, it shows that momentum is changing and potentially a new trend is just being created. When you see the two MACD indicator lines move away from each other, it means that momentum is increasing and the trend is getting stronger.

When the two lines are coming closer to each other, it shows that price is losing strength. During ranges, the two lines from your MACD are very close together and they hover around 0; this means that there is no momentum and no strength.

At point 1, the price also formed a narrow range and when the price breaks out, the two indicator lines pull away from the 0 line and also separate each other. Then, during a trend, the moving averages can act as support and resistance and stay you in trends as the phase 2 and 4 show — the price never broke the moving averages. During a consolidation like in point 3, the MACD contracts sharply as well and traders wait for the breakout of the wedge to signal a new trend.

The divergence at 5 is a signal we will explore below and it predicted the reversal. During the downtrend 6, the price then again stayed below the moving averages while the MACD lines stay below 0.

MACD divergences are another great way to analyze price and find early trend-following trades. At the same time, the MACD moved lower showing that there was no buying strength behind the slow grind. I will try and attach a couple snapshots of past trades, so the whole idea becomes clear.

The blue box is the main entry and the yellow, you can see, is the re-entry. Share your opinion, can help everyone to understand the forex strategy. As an example, once my trade hits the first target, I moved the second position to breakeven and leave the third as it is. When the 2nd position is hit, I move the 3rd to breakeven, giving the trade enough room to breathe.

I then look for the price to come back, to add to the position,. When prices breakout from the falling trend line, long set ups are taken and when prices break the rising trend line, short set ups are taken.

In the above example, from the left, we first plot the rising trend line after identifying the two consecutive higher lows being formed. At the same time, we also spot two consecutive lower highs forming on the chart and we plot the opposing falling trend line.

Now that the set up is formed, when the MACD crosses the 0-line, long positions are placed at the high of the candle with stops set to the low. Prices initially dips lower to the lower end of the range but then move out strongly hitting the take profit levels with ease. In the next chart above, we show an example of a short set up. Here, after plotting the trend lines, prices make a fake-out attempt from the rising trend line. Normal traders would have purchased at this break out but would have resulted in a losing trade.

Take profit is set to two times the risk which results in a quick profit. It offers a clean way to trade the markets and is very subjective, making this a good trading strategy worth trading. Improve Your Trading Skills - Don't miss our new posts!

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