Is it true that MACD can help you reduce your losses?

Of course, it's true, but let's see what the case is.

An example of reverse trading with Bollinger Bands system. Trading in the opposite direction of the price trend is not an easy technique. Although you have shared about this topic, you do not encourage novices to do the same. Therefore, when you mistakenly place orders against the trend, eat is good, what should you do when you get ordered? MACD will save you.


First of all, let's analyze a little bit, the current trend is bullish, let's take a look at the MACD. Traders who have learned how to reverse trade with Bollinger Bands but still do not fully understand nature will be quite hasty in this case. First, they see that the candle (right the red arrow) falls out of the upper boundary, that candle has a long upper tail, the second candle with a red arrow is a candle with a tail showing the selling force. . And they hurriedly assumed it was a down SELL setup despite the rising prices. They put the stop loss as shown.

But here are the results:


Stoploss has been hit. Why did you do what The Blade said has a preliminary signal and a confirmation signal to enter. But still, fail. That is because both of your signals are not strong enough, not drastic enough, not clear enough yet, you still have not understood the nature of the price movement.

Why don't you tell you, simply combine the indicator + candlestick pattern = setup and quickly enter the order, but you have to say long which is the first, which is the confirmation. You want to understand what the role of an indicator is, what the role of price movement is. Can it replace fast? Absolutely not. What must be first, what must go later. That is the meaning of the dharma: taking the indicator as a preliminary signal, taking the price movement as a confirmation signal.

So why is it losing money in this setup? Do you see a strong trend? Two long green trees show that. The green candle that falls out of the border is also a green candle. Whether that candle is qualified as a primer. The tail is not long, but green again, so the downward force is not obvious. Second, the confirmation signal with a red candle (right at the second arrow) also did not show a clear decrease. The downward force was too small compared to the increase from the other two green candles. So both signals are not clear. In this case, if anyone carefully examines the SELL setup will be skipped. We only consider BUY here.

That is about the signal itself. Now, assuming you still don't understand where you went wrong, look down on MACD.


Do you see any downward signs of the MACD? Therefore, it is extremely risky to go against the MACD. As you know, the MACD will signal a price reversal by means of a divergence. The price still increases, but the MACD is slightly decreasing, it is a signal that it is reasonable to go against the trend now.

So in this case, seeing such a strong increase in MACD, it is best not to SELL. Anyone who notices MACD is considered saved from this setup.

So you trade with TREND and get faulty, can MACD save it?

Can be saved. MACD not only saved reversal setups but trend-following setups were caught at the top, bottom, and MACD knew in advance. That's why there is a MACD.
You are a trader who only likes trend trading, when the trend is up, you only BUY and BUY. When the trend is down, you only SELL and SELL. But also sometimes you BUY at the top and SELL at the bottom, of course, lose heavily, then you play in the opposite direction. How to limit such setup? Continue looking at the picture:


As shown in the picture, you will BUY immediately the green candle because it shows an increase after two unsuccessful declines and does not need to consider the market like.

And here are the results - BUY right at the top.


Looking down at the MACD, we analyze it try: in the past, the MACD gradually increased from below zero until now is the highest point.

The MACD is also a very good overbought indicator, although it doesn't have specific levels like RSI (30-70) or Stochastic (20-80), we can also identify overbought. through color and the rise and fall of the MACD.

Specifically, at the tree you entered, before that, MACD increased as high as thistle and changed to red. This shows that there is a part of traders that have taken profit by SELL weakening the uptrend. However, the selling force is still not clear, but it is certain that the upside force has been weak. Move to kilometer 1 and the next tree, the increase has returned, MACD also increased, rest assured, sleep well.

Watch it continuously, we are following the price movement. The next two trees were the bearish candlestick, but the force of the candle was not significant, the MACD also increased gradually, so it did not mind.

Tree 2 appeared with quite a strong downward force and closed lower than the nearest bullish candle, the selling force is now probably in balance with the buying force (even slightly more), for now, we should be cautious about buying force of the market. (signal number 1)

Looking down the MACD shows that MACD is paused, not increasing, and again changing color. (Buying force is being suppressed by selling force). (signal number 2)

Cut your order at PK 2. If the key is on PK 2, we only lose a little (insignificant).

That is how we monitor and analyze an order that is present in the market.

There are still a few more cases to say, but the post is long. See you next time.

Before closing, you repeat one more rule that must be remembered. We not only analyze carefully before entering an order but also constantly review and analyze what is going on with our trading order to minimize losses.