The Topic of this Forex Trading video will be on how to use the MACD Indicator in a new way. Most traders that use the MACD Indicator use the Indicator in a few ways, but not the same as I’m about to share with you.
MACD Signal Line Cross
Some traders look for the MACD line to cross above or below the average line for a trading signal. These traders interpret the MACD line crossing above the average line as bullish and cross below as bearish. Below are some examples of the MACD cross.
MACD Zero Line Cross
Other traders look for the MACD line to cross above or below the zero line. A cross above the zero line signals that the market is bullish. When the MACD line crosses below the zero line, this is considered Bearish. Below are some examples of the zero line cross.
The third and most popular way that traders use the MACD indicator is to find divergences in the Forex, Futures and Stock Market. There are two types of divergences bullish and bearish. A Bullish divergence is when price makes a new low and the MACD indicator does not make a new low. A bearish divergence is when the currency pair makes a new high and MACD does not make a new high. Divergence is simply trying to spot a loss of momentum in a stock, currency pair, or futures contract.
A New Way To Use The MACD Indicator
To Spot Overbought And Oversold Conditions
Using the MACD indicator to spot oversold and overbought conditions is something most traders do not know about. When a trader can identify oversold or overbought conditions correctly they can provide excellent trading opportunities. The first step to identifying overbought or oversold conditions is to open up a price chart with a few years of data loaded. Next, mark off extreme highs and lows on the MACD indicator. I use the standard MACD settings of 12,26, and 9. The next step is to wait for the MACD indicator to reach these extreme levels. I cover this in great detail in the video below.
There are two currency pairs on my radar as I’m writing this blog. Those currency pairs are Usd/Cad and Aud/Usd. The Aussie is not at the level yet but appears to be there in over the next few trading sessions.
Forex Trading Video: Learn A NEW Way To Use MACD
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