Next Level MACD Strategies With Guaranteed Success

Next Level MACD Strategies With Guaranteed Success

Submitted by adil on Mon, 07/28/2014 - 21:00

With The MACD Strategy, You Can't Lose!

If your trading strategy is based upon trend following, then Moving Averages Convergence and Divergence (MACD) is the best tool to analyze market price momentum. Many trading gurus have derived various advanced techniques to efficiently utilize the powers of MACD to increase profit returns. In this article, you will learn how trading decisions can be optimized by depending less on base indicator signals, and using more of MACD signals for alternate trading ideas.

Using MACD Crossovers:

When traders are introduced to MACD, one of the first method they become familiar with is to utilize crossovers as the main source of trading signals. When the market is under bullish influence, a trading signal is generated when MACD crosses the signal line. This trading signal tells the trader that momentum is shifting in the price of the underlying asset. It also signifies that there are more chances that the currency’s value will increase in the near future. In case the market is influenced by bearish trends, the traders should look for the signal which shows MACD has dropped below the signal line. It gives more confidence to the trader that the price of the currency pair will continue to fall in the near future.

When using such trading strategy, it is very important to wait for confirmation of the price to move in the predicted direction before taking a specific market position. Trading without confirmation can lead to losses due to fake-outs that result in considerable stop losses. Traders should also refrain from entering the market too early, and MACD indicator proves to be very efficient in avoiding losses both from fake-outs and early entry.

Trading with MACD Divergences:

Crossovers is the most fundamental implementation of MACD to make successful FOREX trades. There are, however, many other methods that utilize MACD for the same results – more profit returns. The other popular use of MACD is the identify divergence to avoid getting caught in damaging market U-turns. Divergence occurs when the price movement deviates from what the indicator signals read. A divergence is present when the price is reaching a new high level, but the indicator fails to make a similar new high.

The trader should take this difference in price activity and indicator readings very seriously. The disagreement, or absence of confirmation, may mean there is an impending reversal. Reversals can be a problem if the trader is not able to use trade stops smartly.

Before using MACD to identify divergence, it is important that the trader has all the knowledge about divergence and how to perform trading in such situations. It is important as there should be different trading style if divergence happens in a bullish market, and there should be a different trading style when divergence occurs in a bearish market.

Crossovers and divergences are the best way to acquaint yourself with MACD as more new avenues of trading opportunities will open itself. In the start, try MACD only on the currency pair you already have done trading on, this will help you understand how MACD helps in changing losses into profits.