MACD Ultimate Guide – In this tutorial, we will cover 5 trading strategies using the indicator and how you can implement these methodologies within your own trading system.
The MACD is one of the simplest and most effective momentum indicators for forex, stocks, and crypto trading. The MACD turns two trend-following indicators, moving averages, into a momentum oscillator by subtracting the longer moving average from the shorter one.
MACD Indicator Can Be Used For Scalping, Day Trading, And Swing Trading Strategies. What I personally like about the MACD trading strategy is the indicator has a built-in filter for trade signals. This filter is easy to apply to any chart.
The MACD crossover occurs when the MACD line and the signal line intercept, often indicating a change in the momentum or trend of the market. The MACD is seen as an effective indicator, especially in trending markets.
A SELL signal is generated when the MACD crosses below the signal line, and a BUY signal is generated when the MACD crosses above the signal line.
In addition, the locations of these crossovers in relation to the zero line are helpful in determining buy and sell points.
Bullish signals are more significant when the crossing of the MACD line over the signal line takes place below the zero line. Confirmation takes place when both lines cross above the zero line.
How to Use Effectively The MACD Divergence Strategy. In this section, you’ll learn to Implement the MACD Divergence Indicator much more Effectively. This is one of the most powerful trading strategies to use.
You can use the MACD histogram to search for divergences, but also the MACD line and the signal line. The strongest signals appear when there is a double divergence, on both the histogram and on the signal and MACD line.
This is my favorite way to use the MACD, and the most effective way. Trading MACD divergence, if done correctly, can provide you with a real edge in the market. It can be a powerful early indicator of trend reversals when combined with price action and support and resistance.
The basic idea behind combining these two tools is to match crossovers. In other words, if one of the indicators has a cross, we wait for a cross in the same direction by the other indicator. When this happens, we buy or sell the equity.
MACD crosses above its Signal Line
- RVI crosses above its Signal Line
- We hold until the MACD line crosses below its Signal Line
- The MACD line crosses below its Signal Line
- The RVI line crosses below its Signal Line
- To manage the position, we hold until the MACD line crosses above its Signal Line