MACD Indicator: Trade it Like a Pro (Part 2) 
MACD Indicator: Trade it Like a Pro (Part 2)
by InformedTrades
Video Lecture 21 of 77
Not yet rated
Views: 564
Date Added: May 7, 2017

Lecture Description

Practice these concepts with a free practice charting and trading account here: bit.ly/forex-demo1

For the full lesson with images, text, links, and discussion, go here: www.informedtrades.com/3925-macd-learn-trade-macd-indicator-part-2-a.html

For our full beginner course in technical analysis and trading, go here: www.informedtrades.com/index.php?page=freetradingcourses

And of course, don't forget to jump start your learning as a trader by registering as a member of our learning community: www.informedtrades.com

VIDEO NOTES

In our last lesson we looked at the different components that make up the MACD indicator. In today's lesson we are going to look at how traders use the MACD to identify whether or not a market is trending, how strong that trend is, and where good potential entry and exit points are.

As we learned in our last lesson the MACD indicator is used to identify trends in the market and the momentum of those trends. Because of this the MACD is an indicator that traders will look to trade when the market is trending and avoid when the market is range bound.

In addition to being able to tell if the stock, futures contract, or currency you are analyzing is trending or not from simply looking at its price action on the chart, you can also use the MACD indicator. Very simply if the MACD line is at or close to the zero line, this indicates that the financial instrument you are analyzing is not exhibiting strong trending characteristics, and thus should not be traded using the MACD.

Once it is determined that the financial instrument you are analyzing is exhibiting trending characteristics, there are three ways that you can trade the MACD.

1. Positive and Negative Divergence
2. The MACD/Signal Line Crossover
3. The zero line crossover

Trading the MACD Divergence:

Divergence occurs when the direction of the MACD is not moving in the same direction of the financial instrument you are analyzing. This can be seen as an indication that the upward or downward momentum in the market is failing. Traders will thus look to trade the reversal of the trend and consider this signal particularly strong when the market is making a new high or low and the MACD is not.

Trading the MACD Crossover

This is the simplest way to trade the MACD as it involves simply watching the MACD line and going long when the MACD line crosses above the signal line and going short when the MACD line crosses below the signal line. As this strategy generates the most signals, it also generates the most false signals, and the potential to get into a bad trade using just this method is high. For this reason traders will confirm the signals with other methods such as the chart patterns we have learned so far, volume etc.

The MACD Zero Line Crossover:

The MACD zero line cross over occurs when the MACD crosses above or below the line plotted at point zero on the indicator. When this occurs it is an indication that market momentum has reversed direction. The strength of the move that can be expected as a result of this depends on what has been happening in the market, and what has been happening with the indicator. If the market and the MACD are both coming off of recent new highs then this could be considered a strong signal. If the market is simply trading in a weak trend or range and the MACD has simply crossed from just above to just below the zero line, then this would be considered a weak signal.

As with all of the indicators that we are learning about in this series it is normally better to trade the MACD along with other confirming signals such some of the things we have learned so far like trend lines, chart patterns, and breaks of significant support resistance levels.

Course Index

  1. Intro to Technical Analysis
  2. Introduction to Dow Theory
  3. Second 3 Tenets of Dow Theory
  4. How to Read Stock Charts
  5. How to Trade Support and Resistance
  6. Multi Time Frame Analysis
  7. Introduction to the Double Top and Double Bottom Charting Pattern
  8. How to Trade Double Tops Like a Pro
  9. How to Trade the Head and Shoulders Pattern Part 1
  10. How to Trade the Head and Shoulders Pattern Part 2
  11. How to Trade the Wedge Chart Pattern Like a Pro Part 1
  12. How to Trade the Wedge Chart Pattern Like a Pro Part 2
  13. How to Trade the Flag/Pennant Patterns Like a Pro Part 1
  14. How to Trade the Flag/Pennant Patterns Like a Pro Part 2
  15. How to Trade Triangle Chart Patterns Like a Pro Part 1
  16. How to Trade Triangle Chart Patterns Like a Pro Part 2
  17. Learn to Trade with Technical Indicators
  18. How to Trade Moving Averages Like a Pro (Part 1)
  19. How toTrade Moving Averages Like a Pro (Part 2)
  20. How to Trade the MACD Indicator Like a Pro (Part 1)
  21. MACD Indicator: Trade it Like a Pro (Part 2)
  22. How to Trade the Relative Strength Index (RSI) Like a Pro
  23. How to Trade Stochastics Like the Pro's Do
  24. The Difference Between the Fast, Slow and Full Stochastic
  25. How to Trade Bollinger Bands - Stocks, Futures, Forex
  26. How to Trade the Average Directional Index (ADX)
  27. How to Trade the Parabolic SAR
  28. How to Trade Candlestick Chart Formations Part 1
  29. How to Trade Spinning Tops and Doji Candlestick Patterns
  30. How to Trade the Bullish/Bearish Engulfing Candlesticks
  31. How to Trade the Hammer Hanging Man Candlesticks
  32. How to Trade the Morning/Evening Star Candlestick Pattern
  33. How to Trade the Inverted Hammer/Shooting Star Patterns
  34. Why Most Traders Lose Money and The Solution
  35. Why Traders Hold On to Losing Positions
  36. Two Trading Mistakes Which Will Destroy Your Account
  37. Herd Mentality is the Psychology That Leads to Big Trading Losses
  38. Profit Expectations: What Millionaire Traders Know
  39. How to Join the Minority of Traders Who Are Successful
  40. How To Determine Where to Put Your Initial Stop Loss Order
  41. How to Use the Average True Range (ATR) To Set Stops
  42. How to Up Your Chances for Profit When Setting Stops
  43. How to Reduce the Chances of Being Stopped Out on a Trade
  44. How Successful Traders Use Indicators to Place Stops
  45. Stop Your Mind From Causing You to Take Profits Too Soon
  46. How To Use Trailing Stops
  47. Why Position Sizing is So Important in Trading
  48. Why Fixed Position Sizing Is Not the Best Way to Trade
  49. Trading The Martingale and Anti Martingale Strategies
  50. How to Set Trade Position Size for Maximum Profits
  51. Maximize Trading Profits with Correct Position Sizing 2
  52. Fundamental Analysis and The US Economy
  53. A Simple Explanation of the US Economy for Traders
  54. Simple Explanation of The US Economy For Traders Part 2
  55. The Business Cycle and Fiscal Policy - What Traders Know
  56. How Interest Rates Move Markets
  57. What Traders Know About Interest Rates Part 2
  58. What Traders Need to Know About The Structure of The Fed
  59. How the Fed Changes Interest Rates
  60. How to Determine When the Fed is Going to Change Rates
  61. Why Markets Move Ahead of Interest Rate Announcements
  62. How to Trade the GDP Number (Part 1)
  63. The Components of the Gross Domestic Product (GDP)
  64. Intro to Trading Non Farm Payrolls (NFP's)
  65. Trading the News - Economic Numbers - Retail Sales
  66. Trading the News - Economic Numbers - ISM Manufacturing
  67. The Producer Price Index (PPI)
  68. The Consumer Price Index (CPI)
  69. Trade the News - Existing Home Sales Index
  70. How To Interpret the Consumer Confidence Index (CCI)
  71. How to Interpret the Index of Leading Economic Indicators
  72. The Advantages and Disadvantages of Day Trading
  73. The Advantages and Disadvantages of Swing Trading
  74. The Advantages and Disadvantages of Position Trading
  75. How to Keep a Trading Journal
  76. The Most Important Attributes of a Good Trading Journal
  77. The 20 Components of a Successful Trading Plan

Course Description

This is a series of 77 short video lessons meant to give traders an introduction to the basics of trading as well as the components necessary to develop a profitable trading plan.

Comments

There are no comments. Be the first to post one.
  Post comment as a guest user.
Click to login or register:
Your name:
Your email:
(will not appear)
Your comment:
(max. 1000 characters)
Are you human? (Sorry)