The MACD is appreciated by traders the world over for its simplicity and flexibility, as it can be used either as a trend or momentum indicator. To explore what may be a more logical method of trading the MACD divergence, we look at using the MACD histogram for both trade entry and trade exit signals instead of only entry , and how currency traders are uniquely positioned to take advantage of such a strategy. Traders use the MACD to identify when bullish or bearish momentum is high in order to identify entry and exit points for trades. Here we give an overview of how to use the MACD indicator. In the calculation of their values, both moving averages use the closing prices of whatever period is measured. If prices are rising, the histogram grows larger as the speed of the price movement accelerates, and contracts as price movement decelerates.
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The MACD is appreciated by traders the world over for its simplicity and flexibility, as it can be used either as a trend or momentum indicator. To explore what may be a more logical method of trading the MACD divergence, we look at using the MACD histogram for both trade entry and trade exit signals instead of only entry , and how currency traders are uniquely positioned to take advantage of such a strategy. Traders use the MACD to identify when bullish or bearish momentum is high in order to identify entry and exit points for trades.
Here we give an overview of how to use the MACD indicator. In the calculation of their values, both moving averages use the closing prices of whatever period is measured. If prices are rising, the histogram grows larger as the speed of the price movement accelerates, and contracts as price movement decelerates. The same principle works in reverse as prices are falling.
As price action top part of the screen accelerates to the downside, the MACD histogram in the lower part of the screen makes new lows. Source: FXTrek Intellicharts The MACD histogram is the main reason why so many traders rely on this indicator to measure momentum, because it responds to the speed of price movement.
Indeed, most traders use the MACD indicator more frequently to gauge the strength of the price move than to determine the direction of a trend. One of the most common setups is to find chart points at which price makes a new swing high or a new swing low , but the MACD histogram does not, indicating a divergence between price and momentum.
Figure 2 illustrates a typical divergence trade: Figure 2: A typical negative divergence trade using a MACD histogram.
At the right-hand circle on the price chart, the price movements make a new swing high, but at the corresponding circled point on the MACD histogram, the MACD histogram is unable to exceed its previous high of 0. The histogram reached this high at the point indicated by the lower left-hand circle. The divergence is a signal that the price is about to reverse at the new high and, as such, it is a signal for the trader to enter into a short position.
Source: Source: FXTrek Intellicharts Unfortunately, the divergence trade is not very accurate, as it fails more times than it succeeds. Prices frequently have several final bursts up or down that trigger stops and force traders out of position just before the move actually makes a sustained turn and the trade becomes profitable.
Figure 3 demonstrates a typical divergence fakeout , which has frustrated scores of traders over the years: Figure 3: A typical divergence fakeout.
Strong divergence is illustrated by the right circle at the bottom of the chart by the vertical line, but traders who set their stops at swing highs would have been taken out of the trade before it turned in their direction. Source: Source: FXTrek Intellicharts One of the reasons traders often lose with this setup is that they enter a trade on a signal from the MACD indicator but exit it based on the move in price.
Since the MACD histogram is a derivative of price and is not price itself, this approach is, in effect, the trading version of mixing apples and oranges. If, on the other hand, the MACD histogram does not generate a new swing high, the trader then adds to his or her initial position, continually achieving a higher average price for the short.
Currency traders are uniquely positioned to take advantage of this strategy, because the larger the position, the larger the potential gains once the price reverses. In forex FX , you can implement this strategy with any size of position and not have to worry about influencing price. In effect, this strategy requires the trader to average up as prices temporarily move against him or her. Many trading books have derisively dubbed such a technique as " adding to your losers.
In effect, the trader is trying to call the bluff between the seeming strength of immediate price action and the MACD readings that hint at weakness ahead. Still, a well-prepared trader using the advantages of fixed costs in FX, by properly averaging up the trade, can withstand the temporary drawdowns until price turns in his or her favor.
Figure 4 illustrates this strategy in action: Figure 4: The chart indicates where price makes successive highs but the MACD histogram does not - foreshadowing the decline that eventually comes. By averaging up his or her short, the trader eventually earns a handsome profit, as we see the price making a sustained reversal after the final point of divergence. Some rules that traders agree on blindly, such as never adding to a loser, can be successfully broken to achieve extraordinary profits.
However, a logical, methodical approach for violating these important money management rules needs to be established before attempting to capture gains. Applying this method to the FX market, which allows effortless scaling up of positions, makes this idea even more intriguing to day traders and position traders alike. Compare Accounts.
Indicatore MACD: cos’è e come funziona
MACD triggers technical signals when it crosses above to buy or below to sell its signal line. The speed of crossovers is also taken as a signal of a market is overbought or oversold. MACD helps investors understand whether the bullish or bearish movement in the price is strengthening or weakening. In the following chart, you can see how the two EMAs applied to the price chart correspond to the MACD blue crossing above or below its baseline red dashed in the indicator below the price chart. MACD vs.
Trading the MACD divergence
It is based on the moving average, which is simply an average of market prices over a set duration of time. The MACD subtracts one moving average from another, then creates a moving average of this result, called a "signal line. Open your charting software and view any chart you wish. Click the button or menu within the program for selecting technical indicators.
Moving Average Convergence Divergence – MACD
It is used as a trend direction indicator as well as a measure of the momentum in the market. Traders will also use it to confirm a trade when combined with other strategies as well as a means to enter a trading position. The MACD default settings are: 12, 26, 9 which represents the values for: The lookback periods for the fast line 12 The lookback period for the slow line 26 Signal EMA 9 These settings can be easily changed to another popular set of parameters, 8, 17, 9 where: The fast line is set to 8 The slow line is set to 17 The signal line remains at 9 As with any trading indicator , I always start with the input parameters that were set out by the developer and later determine if I will change the values. Intraday traders may want a faster indicator to cut down on lag time due to their short term trading style.
Traditional MACD MT4
Finally, Appel has been cited by numerous financial publications and is a regular guest on various financial news networks. How is the MACD handling the current markets? Can you tell us how you got started in trading? I started out as a personal trader.