In this forex faq, we will be talking about how to use MACD indicator to tell the trend and how to exit your trades.
Hi Mr. KELVIN
Thank you very much for this very good session in your relations.
I usually identify trend in higher timeframe (h4) by MACD and Bollinger Bands and trade in h1 by oscillators. I know when MACD is above zero trend is upward. Sometimes MACD is above zero line but crossover is below zero line with its histogram < 0 for trend correction or reversal.
A question is: In this time, trend is considered upward or must wait for MACD crossover upward. As for exit do you use turning oscillators in higher T.F or lower TF?
In case some of you do not know what oscillators are, they are Stochastic, CCI or RSI.
Before I give my suggestion to this question, maybe give me sometime to explain how to use MACD to tell the trend.
When MACD and its signal line are above the zero line, it is a sign that the currency is in an uptrend. As for the Histogram, it is to show you the strength of the buyer and seller.
There are times where the MACD and its signal line are above the zero line but the histogram has already flipped down below the zero line. As long as the MACD stays above the zero line, the flipping of the histogram is only a sign of retracement.
Therefore as long as the MACD and its signal line is above the zero line, it is still considered an uptrend. In fact, if you are looking to enter a LONG trade to trade the trend, you should wait for the histogram to flip up.
As for the second questions regarding the exit strategy, you should use the oscillator on the lower time frame. This is because the lower time frame will always react faster than the higher time frame and this allows you to exit your position before the currency reverse.