MACD Forex Trading Strategies for Beginners

MACD is a popular trend-following indicator based on moving garages and at the same time ideal to act as an additional momentum filter for your trading In this video I will explain what are the best MACD signals and how you should read MACD for price analysis and how to use it in your trading strategy First before we analyze the signals, let’s take a look On the individual components of the MACD indicator, we have the MACD line which represents the heart of the indicator and by default is the difference between the 12 period EMA and the 26 periods DMA. This means that the MACD line is essentially a complete moving average crossover system.

MACD Forex Trading Strategies for Beginners

We have the signal line which is the 9th period EMA of the macd line and we make the chart the difference between the macd line and the signal line Now let’s analyze the top 10 MACD signals one by one One new high or low numbers for the macd line One of the simplest ways to use macd as a momentum indicator is to look for The macd line to make a new high or low is important and the tendency to enter a pullback that follows extreme new momentum is a minor complication that the MACD is not an unlimited indicator, so it is not possible to set fixed reference levels in practice.

Explain what the MACD indicator is, how to calculate it, and its various components

It is sufficient to use a rough intuitive guideline by comparing the indicator with its recent history, where the momentum exploded on the MACD line is just a visual representation of the information already present in the price bars but it can be a useful confirmation in some situations in this example at the point where the market made a strong move down which It also pushed the MACD line to a new significant level. Low relative to its recent history After an extended consolidation, the market made a new low at the point marked b, at which time the MACD made a low again When the volatility in the price and the volatility in the MACD show the same you can expect the trend to continue.

MACD line crossing the zero level Besides the MACD, I also plotted two moving averages on the 12 and 26 SMA charts to show you how the MACD works when the two moving averages cross the MACD line crossing above and below zero As I said before the MACD is a mean crossover system Its moving average is in just one line, as the intersection of two moving averages can show a change in momentum and can often herald the creation of a new trend movement. Of course, you don’t trade every time a line crosses a level.

Forex MACD trading lines, signal lines, and histogram indicator

You should consider other elements such as price action and key support and resistance levels Number Three MACD Line Divergence If the best pullbacks are preceded by the line the fast MACD line forms an important new high or low in the case of a downtrend, so it logically follows that pullbacks that are not Set up by a new high or low on the MACD

It is unlikely to have a good continuation, this is the concept of momentum divergence. The market achieves a new price high that is not followed by a new high on the indicator and vice versa in a downtrend. In this case, momentum divergence may indicate that the dominant group in the market may be losing ground and that a reversal is more likely than a continuation. Be careful with the location of the divergences.

Practical examples of applying MACD Forex trading strategies

In this example, at least three momentum divergences were created against this extended trend which all failed, and this is one working definition of a trend just as with trend-breaking support or resistance trends. Momentum divergences also roll in the context of a strong trend. Traders who use MACD line deviations during impulsive moves to create counter-trend positions will record consistent losses, so it is best to avoid those trades and focus on deviations that occur after pullbacks.

Over the extended MACD line, extreme price rises will be followed by sell-offs, and vice versa. A trading strategy that constantly buys at the highs and sells at the extreme lows is likely to be painful, so a simple rule based on the MACD can help us avoid many… In these situations.

Important tips and advice for MACD Forex trading

The rule is simply to try to avoid buying when the MACD line extends to the highs and to try to avoid selling when it extends to a low area. When the MACD line extends significantly to the upside, this may indicate that the move has already been crossed and is likely set for a minor reversal though. Although it is difficult to define this trend in a specific set of rules, your results will improve by adding this rule that prevents you from buying when the MACD line extends to the upside or selling short when it extends to the downside.

The inability of the MACD line to return to zero level, one very important point that many traders ignore is the ability of the MACD to enter the overbought zone as evidence of real strength in the market or vice versa for oversold readings even though the MACD indicator does not have peak levels. Overbought or oversold.

Summary

Many traders initially tend to fade extreme moves on the indicator, this is normal, especially for traders who have some familiarity with the Stochastic or RSI but it is important to realize that one of the common patterns of the MACD does not have overbought or oversold levels. . macd is that the macd line will enter robot territory in a strong trend and stay there for an extended period, the inability of the fast macd line to pull back is a reflection of the conviction behind the price action and it should not be so.