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Chapter 12, Part II. Moving Average Convergence Divergence - MACD Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 20, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Fine Tuning of MACD and some advanced talks


    1. The type of MAs that are used in MACD indicator do make sense!

    You have to know that MACD could be different in different software programs. As many software programs as many different combinations of MA types they use in MACD Indicator. Usually MA1 and MA2 are Exponential and the Signal line is simple MA. Personally I prefer to use the exponential way of averaging for all lines in MACD Indicator;

    2. As with any other indicator MACD demands a responsible approach to using it. You should investigate what type of MAs averaging in MACD and what parameters of them are most suitable personally for you. Also you can apply different parameters to different pairs and time frames. Maybe it will make sense.

    3. Usually trend shifting is treated as confirmed when the market confirms it by close price. It is important, because if you’ve entered long in the beginning of the current trading session and an unconfirmed trend was, say, bullish but when trading session has closed and the confirmed trend becomes bearish – so you will be on the wrong side of price action.

    4. The angle of line crossing does make big sense. The greater the angle – the stronger the signal of trend shifting:


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    This is not necessary means that a weaker signal will lead to loss or choppy price action. Sometimes even a weaker signal could lead to a tremendous trend. But from a confidence and probability point of view – the greater the angle of crossing, the better.

    5. MACD works much better if the market is in a thrusting move. If for instance, if the market has shown a nice thrust up (at least 8-12 bars), and then has turned to retracement down – then a MACD signal about continuation of the previous up move has more chances for success because it is supported by market momentum. When the market choppy and sloppy, without any signs of thrust – better not to trade here with MACD or any other trend indicators.

    This is not necessary means that a weaker signal will lead to loss or choppy price action. Sometimes even a weaker signal could lead to a tremendous trend. But from a confidence and probability point of view – the greater the angle of crossing, the better.



    P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon.



    Note: FPA ranks are earned in the battles against scam, not in the classroom.
     
    Hamza Samiullah and fran alvarez like this.
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