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MACD Day Trading – What You Need to Know

Most people don’t realize this but there are some trading indicators that work better than others. The MACD day trading indicator is more reliable than most. Learning to use it can produce some great results when buying and selling currency pairs.

If you’ve used or read about MACD, it seems pretty easy. However, this is a trailing indicator and needs to be used cautiously. If used right, it can provide helpful insight into your day trading.

This trading tool works better on currency pair price history than on stocks. With stocks, price can gap up or down which causes it to give false readings. Currency pair’s price action rarely gaps.

The main way to use this indicator is to predict a price reversal. The best way to do this is to use what’s known as MACD divergence. When this happens, price action and the indicators signal line will being moving away from each other.

The easiest way to see the divergence clearly is to add a Moving Average line to your charts. You then compare the MA line with MACD signal line. If the MA line is moving up and the signal line is moving down, price is about to reverse. The same happens when the MA line is moving down and the signal line is moving up.

Divergence is very consistent. However, you will need more than this to pin point the exact time to enter a trade. This method just helps you to be aware that a price reversal is about to occur.

You can add support and resistance indicators to help you know when to enter a trade after seeing divergence.

Drawing trend lines on support and resistance levels will help. You can look for either trend line breaks where price will continue to travel or a reversal point. These too are very consistent methods to predict where price may be heading next.

One final consideration when doing MACD day trading is to trade with the trend. To increase the probability of being right, you should first determine how the currency pair is trending. You will want to see what way it’s trending on the daily chart and hourly chart.

In conclusion, doing manual set ups like MACD day trading is very difficult. You need to practice this for many hours until you get consistent at picking out winning trades. Or, you can use trading software that will do this for you.


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