The MACD is one of the most popular forex indicators used by forex traders to determine trend.
That being said, the MACD indicator consists of two lines, the faster moving line and the slower moving line. When the faster moving MACD line crosses the slower moving to the upside, that means the market is in an uptrend so you look to buy. If it crosses to the downside, it means the market is in a downtrend, so you look to sell.
That is a very simple explanation of the MACD forex indicator.
THE TRADING RULES OF THE MACD CROSSOVER SWING TRADING SYSTEM
To enter into a trade using the macd crossover system is very simple, here’s how:
- 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 SWING TRADING SYSTEM
- Because 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.
- So what happens is 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!
SO ARE THERE ANY ADVANTAGES OF THERE MACD CROSSOVER SWING TRADING SYSTEM?
Yes, here they are:
- in a nice trending market, the macd crossover trading system will work perfectly
- that means nice big profits in pips
- don’t forget, its a very simple trading system-no complications.
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