Understanding MACD (Part 5)

05/02/2008 12:00 am EST


Now take a look at the complete picture, below:

The above graphic shows an example of two trades that should have been avoided on the MACD and one opportunity that shouldn’t have been overlooked. The first directional change is weak, lines essentially move sideways. The second directional change is strong, prices dive immediately and just three lines into the histogram a trader wise enough to short the market still has 70 pips left in this downward move. The third directional change is again weak, and is nothing more than a retracement, and indication to the trader that shorted the second move that he or she might want to secure profits...but not enter a new trade.

MACD is simply another trading tool you should consider for your trading arsenal.

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