Using traditional MACD - MACD histogram. There are usually two parts as shown below:


The first part consists of two lines. The blue line represents the 26-period EMA and the 12-period EMA. The red line is the 9-period EMA for the MACD. The second part is the gray array, it is calculated by the value of the blue line subtraction value of the red line. So, for the sake of ease of use, temporarily removed the blue and red lines, using only the gray strip.

Also, change the parameters a bit. The default parameter of the MACD is 12,26,9. To get rid of the interference I will set it to 24.52.14 for trading. MACD (24,52,14) will, of course, be slower, but it will give a more reliable signal. This is a useful point when using MACD.

IS MACD DIVERGENCE USEFUL?

Many of you still have doubts about the usefulness of MACD. Perhaps because it did not bring positive results for you. But as far as I can see, MACD divergence is one of the most accurate signals I've ever used, if you know how to use it of course.

As you all know, MACD divergence gives early reversal signals.


The picture above shows a down reversal divergence when the price makes the second vertex higher than first vertex, but the MACD for that second vertex lower than the first vertex. When the price looks bullish but the MACD is down, it's called divergence.

You want to know if this divergence has a correct signal or not, it always has to be a signal confirming the price force before we enter the command.

You see, after forming a long bearish candle, the upper tail is also very long to create divergence. (There are both signals of falling out of the boundary above the BBs, there is a candle to confirm strong selling pressure and divergence). With these three signals, we can SELL already because there are also confirmation signals.

More cautious traders wait for one more candle, the next candle also confirms the SELL signal. And how come SELL, the price has reversed.

And this is how we enter the command:


WHAT IS MACD CONVERGENCE? IS THERE ANY DIVERGENCE?

Like, twins, but the one above decreases, this one signals an increase.

For example this:


Do you see the two red lines converging? That's why we call it convergence. But often traders call it divergence.

There are some friends who take its name seriously, it is not necessary, as long as there is a difference in direction between price and MACD, we consider it as a reversal signal.

In the picture above, the price creates the lower bottom lower than the previous bottom, but the MACD creates the lower bottom lower than the previous one. Hence, the MACD convergence.

As usual, to convert this signal into a BUY command, we have to find a confirmation of this convergence. We notice a bullish Engulfing (increase right at the back bottom of the price). This is a strong reversal candlestick pattern which also confirms that convergence is valid. So we can enter command when that bullish candle closes and place a stop loss as shown in the image below.

More cautious traders can wait for another strong bullish candle to confirm that buyers have complete control of the market and drive the price up. Right after the candle command entry, there was a strong bullish candle, and once again, the buying force was confirmed. At this point, I sure it. You don't have to be afraid anymore.

Take the indicator as a PRELIMINARY SIGNAL, use the price movement as a CONFIRMATION SIGNAL. Using indicators alone is not done, just using price movement alone also not done. Must combine the two!

THIS IS HOW MACD HELP TRADER AVOID FAKE ISLAND SIGNALS!

The picture below will show you that if you just look at each candlestick position, you won't be able to succeed. But with the addition of MACD, you will be more breathing with the market.


1. Candle 1 provides a piercing line candlestick (roughly translated: increased through a throughput line), also stuck its tail out the border BBs but not very strong. At first glance, there was no signal that buyers were buying at all. But new traders and inexperienced traders will apply machines: after kilometer 1 is a beautiful candle increase to confirm that the buyer has the upper hand in the market, BUY only.

Not really. It has many reasons, you just need to understand one simple thing: there must be a PRELIMINARY SIGNAL FOR THE CONFIRMATION SIGNAL TO BE VALUE. In this case, where is your preliminary signal?

Look down the MACD to find preliminary signals, absolutely not there, MACD at position 2 is also decreasing. So there is no signal.

2. Continuing, candle number 3, and MACD number 4 are exactly the same as in the above case, with confirmation signal without initial signal. MACD fell deeper. Next!

3. Moving on, candle 5 and MACD number 6 are exactly the same. Come on next.

4. Candle 7 and MACD number 8, you should consider for yourself.

5. Here! Just what we expected. Candle 9 is a long-tailed pin bar, which reaches down to the middle border but closes above the middle border (signal 1), short-term uptrend (signal 2), MACD ascends at 10 (signal 3). Finally, the confirmation signal appeared in the next candle at kilometer 9. BUY!

6. Candle 11, please explain

7. Candle 12, please explain

How do you feel about how MACD protects you from ridiculous entry signals as well as helps you have a satisfactory entry setup.

Take the indicator as a PRELIMINARY SIGNAL, use the price movement as a CONFIRMATION SIGNAL. Using indicators alone is not done, just using price movement alone also not done. Must combine the two!