Technical Analysis Using MACD
As you see, the MACD indicator is pretty rich on technical signals, and may be a very versatile trading tool. you'll also trade effectively by using MACD together with price action analysis.Best technique is using MACD forex strategy
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Above you see the MACD indicator applied to an MT4 chart. The indicator is attached at rock bottom of the worth graph. The image starts with a bearish divergence between the worth action and therefore the MACD indicator. As you see, the worth creates higher highs, while the tops of the MACD indicator are decreasing (blue). the 2 MACD lines cross afterwards and therefore the price drops. Then we see four more price swings related with bullish and bearish MACD crossovers. whenever the 2 lines cross we see a price swing within the direction of the crossover. Now let’s shift to a different example using MACD analysis:
In this case, the worth decreases after a bearish MACD crossover. However, 7 periods later we see a possible oversold MACD signal. The MACD line gains a big bearish distance from the signal line. this suggests that the Forex pair could also be oversold and prepared for a bounce. As you see, the worth increases afterwards.
Forex MACD Strategy
Keeping in mind the six technical signals we discussed above we will divide the trade entry rules of the MACD indicator with the 2 types: bullish and bearish for
Bullish MACD Signals – Consider opening long trades after each of those three signals.
Bullish MACD Crossover
Bullish MACD Divergence
Oversold MACD
Bearish MACD Signals – Consider opening short trades after each of those three signals.
Bearish MACD Crossover
Bearish MACD Divergence
Overbought MACD
Stop Loss on MACD Forex strategy
When you open a trade employing a MACD analysis, you'll want to guard your position with a stop loss order. to put your stop loss order effectively, you ought to ask the chart for previous price action swing points.
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Taking Profit on
Forex MACD Strategy
One way to exit a MACD forex strategy is to carry until you receive an opposite signal. So a contrary MACD signal would be your signal to shut out your trade. However, there are many other ways to manage your trade supported your personal preferences.
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One thing to notice is that the line breakout and therefore the bearish MACD crossover generate matching short signals on the chart, meaning that this might provide for a brief trade opportunity.
You should always be watchful of price action clues when trading MACD divergence. this manner you'll attain a far better understanding of where and when to enter and exit your MACD divergence trades.
The MACD forex strategy is one among the foremost widely used indicators for Forex trading.
MACD is an abbreviation for Moving Average Convergence Divergence.
It is calculated using Moving Averages, which makes it a lagging indicator.
The main function of the MACD is to get new trends and to assist find the top of present trends.
The MACD consists of three components:
MACD line – calculated by taking the difference between 12 and 26 period Exponential Moving Averages
Signal Line- smoothes the MACD line with 9 periods
Histogram – represents the difference between the MACD line and therefore the Signal Line
There are 6 basic signals related with the MACD trade indicator:
Bullish Crossover – bullish signal
Bearish Crossover – bearish signal
Bullish Divergence – bullish signal
Bearish Divergence – bearish signal
Oversold MACD – bullish signal
Overbought MACD – bearish signal
The MACD indicator provides a myriad on signals, which makes it useful as an honest standalone tool, but the simplest results come when the indicator is combined with price action analysis.
These are the essential rules for trading with the MACD indicator:
Consider long trades once you see a bullish MACD signal.
Consider short trades once you see a bearish MACD signal.
If you trade long, you ought to put a stop below an earlier bottom on the chart.
If you trade short, you ought to put a stop above an earlier top on the chart.
Hold your trades until you see an opposite MACD signal or until your stop is hit. you ought to use price action clues for managing potential exit points.
