21. MACD Indicator: Trade it Like a Pro (Part 2)

www.informedtrades.com — Home of the largest free university for traders The second lesson of two on how to trade the moving average convergence divergence (MACD) for day traders and investors using technical analysis in the stock market, futures market, and forex market. The link that I reference in my video is here www.informedtrades.com In addition to being able to tell if the stock, futures contract, or currency you are analyzing is trending or not from simply looking at its price action on the chart, you can also use the MACD indicator. Very simply if the MACD line is at or close to the zero line, this indicates that the financial instrument you are analyzing is not exhibiting strong trending characteristics, and thus should not be traded using the MACD. Example of Trending and Non Trending Markets Once it is determined that the financial instrument you are analyzing is exhibiting trending characteristics, there are three ways that you can trade the MACD. 1. Positive and Negative Divergence 2. The MACD/Signal Line Crossover 3. The zero line crossover Trading the MACD Divergence: Divergence occurs when the direction of the MACD is not moving in the same direction of the financial instrument you are analyzing. This can be seen as an indication that the upward or downward momentum in the market is failing. Traders will thus look to trade the reversal of the trend and consider this signal particularly strong when the market is making a new high or low and the MACD is …