MACD is one of the most popular indicators out there, every trader know what is MACD. But not all of the traders know how to use MACD indicator properly. I write about MACD trading strategy few months ago, but this time I want to share how to use MACD to improve your trading strategy. What I mean whit that, is how to use MACD indicator to be sure that this is right entry point, no matter what strategy you are using. I like to mix MACD with support and resistance zones, with MACD I make sure if the trend is storng and will surpass or break S/R zone. MACD as a indicator gives traders really useful information.
Every trader somehow find to mange to take trades at the end of the trend....Sounds familiar? Then MACD will help to resolve this problem, atleast you will minimize your risk.
In the chart we can see few red candles in a row , and what we all know that this is a down trend, so the main question:"where should I enter my position?" Now or I have to wait? and if I enter now how I would know that the price will not go reverse soon after I open position?
But there is easy way to tell if the trend is strong or weak. MACD indicator will help to recognize if the trend is strong or weak.
Look at the MACD Indicator (1.) we can see that MACD is indicating a weakness in a down trend this could probably save you a lot of money. Just imagine opening a short position just because you think this is a down trend? And top of that we also can see MACD crossover.
Now look at example (2.) strong up trend bunch of green candles. Strong up trend? No...MACD is indicating a weakness in a up trend (2.) and after that crossover.
So you can use MACD Indicator to make sure that the trend is strong. This goes well with S/R zones, this gives you opportunity to know if the trend will break you S/R zone.
But how the MACD bars now the strenght of the trend? MACD compares the average of 12 candles with the average of 26 candles. It will give use the value of if the last 12 candles are weak or strong compare of the last 26 candles.
I know at the first time it sound complex, but it's not necessary for you to know this.
Good Luck Guys, And Be Safe Out Ther