| MACD Indicator can be a good Forex Strategy Tool |
 With any forex strategy, there comes a time when you enter into a trade and immediately after some time, you wish that you had not entered into that trade. There is an important tool that can add sheen to your forex strategy. The tool is MACD (Moving Average Convergence Divergence) Indicator that adds a degree of surety to your forex strategy.Yet, it should not be treated as a magic wand. As with all indicators, it is not safe to enter into forex trades with MACD indicator alone. However, this indicator can help give you confirmation that you are going the right way and that your trade could be a higher probability should you exercise caution on higher time frames. The default MACD indicator usually sets two EMAs (Exponential Moving Averages) at twelve days and twenty six days. This setting is available on most charting packages. This is represented by a colored line which crosses another different colored line known as the trigger line. When the MACD indicator line crosses above the trigger line, it indicates upward momentum and should it be the other way, it indicates vice versa. A center line or the water line is also shown in the MACD indicator. When the MACD indicator is above the water line, it indicates an upward trend and when it is below the water line, it indicates a downward trend. MACD also will include a histogram with small vertical lines which appear above or below the water line when you will see figures like valleys and hills appearing on the chart. MACD is an indicator that follows price action. The histogram is an indicator of MACD and watching this histogram can give you an early hint of where the MACD is headed. The height of the histogram can be a good indicator of momentum. You have to learn to use the MACD to your advantage as a safety indicator. If you want to be extra cautious with your forex strategy, you can pay attention to MACD on the one-hour and four-hour charts, going only for high probability trades. Some safe traders will only enter a trade when the one-hour and the four-hour MACDs are going in the same direction. This means that the number of trades may be less but the ones you do end up taking will most probably give you profit. The MACD on the one-hour chart is very powerful. If you want to avoid trouble and not regret later, you must never trade against the direction of the one-hour MACD. For less experienced traders, trading long when MACD has crossed up and trading short when MACD has crossed down on the hourly chart will give you a high success rate with your forex strategy and will save you from heartache and anxiety. The MACD indicator certainly has a place in a successful trader's kit in his forex strategy. It comes as a standard forex signal on all the main charting packages. It is better to use MACD as a confirmation forex signal that you are going in the right direction rather than a standalone indicator. |
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