In order to profit from the Macd indicator, you must know how to read it properly. It is a diverging and moving average indicator that signals when prices are changing direction. The difference between its lines is represented on the histogram. If it is above zero, the market price is in an uptrend. If it is below zero, it is in a downtrend. When MACD is above zero, the market price is in an uptrend, and if it is below zero, the market price is in a downtrend. A downtrend is indicated by lower highs and lows and a break below support levels.
When the MACD diverges from the price, it indicates a reversal and a potential reversal. However, a divergence that occurs when price makes a lower high and the MACD reaches a higher low can indicate a powerful move ahead. Once the MACD starts to tighten, buying may pick up, and a reversal is possible. In these situations, you would buy when the MACD signal is above the 200-period moving average.
To learn more about the MACD trading strategy, read popular technical analysis books and other online resources. This article will highlight ten books on the subject. External resources include websites and videos. The authors also include links to additional sources of information. It’s a great way to test your trading knowledge before using it in a live account. A demo trading account will allow you to practice without the risk of losing real money. So, don’t hesitate to check out the books and learn as much as you can about this strategy. If you haven’t yet, you’ll be glad you did.
Another important part of the zero cross strategy is knowing when to exit the market. For example, if a bullish trendline breaks, it will be a good time to exit the trade. If it breaks below the swing low and above the swing high, it’s time to exit the trade. So, if the MACD diverges to the downside, it means that a bearish move is imminent. If the trendline breaks below the swing low and rises above the swing high, it’s time to exit the trade.
Using the MACD-Histogram correctly is an essential part of trading. Its graph reveals when the market is up or down, and acts on the lower timeframes as well. The auxiliary line acts as a moving average based on the MACD-Histogram readings. The auxiliary line helps traders identify the trend based on the movement in the indicator. It’s also important to keep in mind that the MACD-Histogram is usually positive when it’s above zero and negative when it’s below it.
One of the key uses of the MACD indicator is to identify overbought and oversold assets. Overbought assets have a tendency to reverse direction, so a MACD divergence signals a reversal of trend. If the MACD is below zero, the asset has already become overbought and is on its way to becoming oversold again. Once this happens, the price will fall in the downtrend. Traders can make short-term scalp trades based on this information.