BindalFX 4x4u.net        Online Trading    
 

MACD

There are three ways we will suggest you can use MACD for determining trends.

  • MACD Zero Line
  • MACD Crossover
  • MACD Combination

 

MACD Zero Line

If the MACD line is above the zero line, you are bullish; if it is below the zero line you are bearish.

This is a weekly chart of the S&P 500 stock index. Apart from three periods (circled in green), the MACD stays above or below the zero line for a very prolonged period.

The trend is bullish if the leading MACD line (red line) is above the zero line (black horizontal line)

The trend is bearish if the leading MACD line is below the zero line

 

MACD Crossover

If the MACD line (red leading line) is above the signal line (green line) you are bullish; if it is below the signal line you are bearish.

This method will suit shorter term trading as opposed to longer term trading because the fluctuations from uptrend to downtrend and uptrend again will be far more frequent than using the MACD zero line.

MACD Combination

Using both methods just previously discussed, we can combine them to create the following rules.

If the MACD is above the zero line, and the MACD line is above the signal line we are bullish; if the MACD is below the zero line and the MACD line is below the signal line we are bearish.

In the following chart and in the lower pane, the red circles indicate bullish points, where the MACD is above zero and above its signal line (red line is above the green line). The black arrows indicate where the MACD line crossed back below the signal line, and although still being above the zero line on all five occasions, it gives a neutral reading; neither bullish nor bearish. Once again this method will suit shorter term trading as opposed to longer term trading.

 

 

 

Move on to Step 4 - Module 2 > Trading System Builder Tool Kit: Trading Rules > Trend: Trend Lines and Channels

 

  

____Step_1____
Welcome
Binding Agreement
____Step_2____
Your Trading Business
□ Trading Styles
□ Objectives
□ Business Resources
□ Business Assets & Liabilities
____Step_3____
Market Basics
□ Stocks
□ Forex
□ Futures
□ Options
□ CFDs
Trading Basics
□ Reading Price Charts
□ Types of Markets
□ Types of Trading
□ Placing Orders
____Step_4____
Charting Basics
□ Pivot Points
□ Trend Points
□ Isolation Points
□ Real Bars
□ Summary & Test
□ Answers
Trading System Builder Tool Kit
□ Trading Rules
□ -1 Trend
□ _Moving Averages
□ _MACD
□ _Trend Lines & Channels
□ -2 Trigger
□ _Moving Averages
□ _MACD
□ _Stochastic
□ _RSI
□ _Bollinger Bands
□ _Fibonacci
□ _Support & Resistance
□ _Trend Lines
□ _Divergence
□ _Volume
□ _Price Bar Patterns
□ _Breakouts
□ _Which Triggers To Use
□ -3 Trade
□ -4 Terminate
□ _Initial Stop Loss
□ _Exit Strategy
□ -Filters
____Step_5____
Risk Management
Back Testing & Evaluation
Running The Business
Additional Tools & Resources
Resources