Here’s a brief explanation of the MACD indicator:[sociallocker]
- The MACD is one of the most popular forex indicators used by traders to determine the trend.
- the MACD consists of two lines, the faster moving line and the slower moving line.
- when the faster moving line crosses the slower moving line to the upside, that means its an uptrend so you look to buy.
- when the faster moving line crosses the slower moving line to the downside, it means its a downtrend so you look to sell.
Indicators: obviously MACD!
Currency Pairs: Any
TRADING RULES OF THE MACD FOREX TRADING STRATEGY
- Wait for the MACD to cross
- Then Place your order-preferably a buy stop or sell stop order.
- You stop loss should be placed significantly away from your trade entry point to avoid getting prematurely stopped out.
- To exit a trade or take profit, you wait for the opposite trade signal before you exit. For example, if you were in a buy trade, then wait for a sell signal and when that happens, you exit your buy trade and enter a sell trade.
DISADVANTAGES OF THE MACD CROSSOVER FOREX TRADING STRATEGY
- MACD is a lagging forex indicator, by the time when you are ready to enter a trade based on the MACD signal, the market at the stage would have moved a lot.
- This means that you may be entering a trade at a time when the market may be due for a reversal so guess what happens? You get stopped out!
- if price consolidates or moves in a sideways trend, you will get too many false signals and may get stopped out a lot too!
ADVANTAGES OF THERE MACD CROSSOVER FOREX TRADING STRATEGY
- in a nice trending market, the macd crossover trading strategy will work perfectly
- that means nice big profits in pips
- its a very simple forex trading strategy for beginners to use.
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