EASY MACD Trading Strategy for Daytrading Forex | MACD SECRETS (MUST KNOW)

In this video I am going to be sharing the best ways of using the MACD indicator to make consistent profits.

But, before we start, be sure to subscribe to our channel as we share new and effective strategies every week to help you become a better trader. With that being said lets get started.

Firstly, let us understand what is the MACD indicator and why should we use it?

MACD stands for Moving Average Convergence Divergence. The MACD indicator is a simple trend following momentum indicator that shows the relationship between two moving averages of the asset.

It is calculated by subtracting the 26 period exponential moving average from the 12 period EMA. The result is plotted on the chart with the blue line. This is called the MACD line

The Yellow line here is a simple 9 period moving average of the MACD line. It is known as the signal line. The signal line can be used as a trigger to activate buy or sell trades.

For example, when the MACD line crosses above the signal line, it indicates a Buy signal. Similarly, if the blue line crosses below the signal line, it indicates a Sell signal.

As I said earlier, the MACD line is calculated by subtracting the 26 period EMA from the 12 period EMA. When the price is in an uptrend, the 12 period EMA will be above the 26 period EMA, therefore, the MACD line will be above 0.

On the other hand, in a downtrend, the 12 period EMA will be below the 26 period EMA, and hence, the MACD line will be below the zero line.

Now let us bring in the last element of the MACD indicator. That is the MACD histogram.

The MACD histogram shows the distance between the MACD and the signal line. If the MACD line is above the signal line, the histogram will show green bars. On the other hand, if the MACD line is below the signal line, the histogram will show red bars.

Traders often use the histogram to identify the momentum of the market. When the market is in high momentum, the distance between the MACD and signal line will increase with each candle, and hence the histogram will also increase with every bar. But, when the market looses the momentum, the histogram will show smaller bars with a light color. This indicates a decline in momentum.

The histogram is an important part of the MACD indicator, but, we will not use it in our strategies.

An important point here is that we will not use the MACD alone to trade, but, we want to use the MACD in conjunction with other concepts to identify trade opportunities.

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