Use MACD With This SPECIAL Settings... BEST MACD Settings for Scalping and Day Trading

Summary

This video tutorial introduces a specialized MACD setting for identifying market trends on shorter time frames, ideal for scalping and day trading. The recommended settings are a fast length of 34, a slow length of 144, and a signal smoothing of 9, with only the histogram displayed. The MACD is used to detect the current market direction and potential trend changes, not for direct trading signals. The video also explains how to interpret divergences as signs of weakening trends, emphasizing that color changes in the histogram are not trading signals but indicators of trend strength.

Takeaways

• 📊 The MACD (Moving Average Convergence Divergence) is a popular indicator used by traders of all types, including scalpers and long-term traders, for identifying trends, measuring momentum, and evaluating trend strength or weakness.
• 🔍 The video introduces a specific MACD setting suitable for shorter time frames, ideal for scalping and day trading, which emphasizes the histogram over the MACD and signal lines.
• 🛠️ To apply this setting on TradingView, one must adjust the fast length to 34, the slow length to 144, and keep the signal smoothing at 9, then disable the display of MACD and signal lines.
• 📈 The Hiken Ashi chart type is recommended for better alignment with the MACD histogram, reflecting price advances, declines, and pullbacks.
• ⏱️ This MACD configuration is particularly useful on shorter time frames, such as the one-minute chart shown, and can be adapted for other intraday time frames.
• 🚫 The special MACD setting is not intended for generating trading signals but for identifying the current market direction and potential trend changes.
• 🟢 A bullish trading strategy could involve taking trades in the direction of the market when the MACD histogram is green, indicating low-risk signals as entries align with the market trend.
• 🟡 Divergences, where price action and the MACD histogram show opposing movements, suggest weakening trends and potential trend reversals, though not guarantees.
• 🔴 During downtrends, the MACD histogram turning red signifies bearish momentum, and only bearish crossovers should be considered for trades.
• 🔄 In a trading range, the MACD histogram may frequently change colors before the market establishes a clear direction, indicating the MACD's color change is not a reliable trading signal.
• 👀 The video emphasizes the importance of using the MACD histogram with these settings for trend identification rather than as a standalone trading tool, and to be cautious of false signals.

Q & A

What is the primary purpose of the MACD indicator according to the video?

The primary purpose of the MACD indicator, as discussed in the video, is to identify trends, measure momentum, evaluate the strength or weakness of a trend, and discover reversal points in the market.

What are the specific settings for the MACD indicator recommended in the video for shorter time frames?

For shorter time frames suitable for scalping and day trading, the video recommends setting the fast length at 34, the slow length at 144, and the signal smoothing at 9.

Why is it suggested to uncheck the MACD and Signal lines in the video?

The video suggests unchecking the MACD and Signal lines because, in the described method, only the histogram is needed for identifying the current direction of the market.

What chart type is recommended to better match with the MACD histogram according to the video?

The video recommends setting the chart type to Heikin Ashi to better match with the MACD histogram, as it better reflects the advancing and declining of the price and the pullbacks.

What is the recommended time frame for using the special MACD settings discussed in the video?

The recommended time frame for using the special MACD settings is the one-minute chart for intraday trading, although it can be used on other intraday time frames as well.

How should the MACD indicator with the special settings be used in trading strategies according to the video?

The MACD indicator with the special settings should be used for identifying the current direction of the market and possible changes in the trend, not for direct trading signals. It can be used alongside other indicators or on a different screen for reference.

What does the video suggest about taking trading signals from the MACD histogram?

The video suggests taking only bullish crossovers when the MACD histogram is green and bearish crossovers when it is red, as these are considered low-risk trading signals since they align with the market direction.

What is a Divergence as mentioned in the video, and what does it indicate?

A Divergence, as mentioned in the video, occurs when there is a discrepancy between the price action and the MACD histogram. For example, a bearish divergence indicates that the price made a higher high, but the histogram made a lower high, suggesting that the upside momentum is losing strength and the trend may weaken or reverse.

How does the video explain the behavior of the MACD histogram during a well-developed trend?

The video explains that during a well-developed trend, if a divergence occurs, it suggests that the trend might be weakening. However, it emphasizes that a divergence is just a possibility and not a guarantee of a trend change.

What is the importance of observing the color change of the MACD histogram according to the video?

According to the video, the color change of the MACD histogram should not be used as a trading signal. Instead, it is used to identify the current trend and possible changes in market direction, especially in the context of trend strength and potential reversals.

What should a trader do if they observe a deep correction or pullback in the market while using the MACD settings from the video?

If a trader observes a deep correction or pullback, they may see a slight change in the MACD histogram color, which could then revert back to its previous state. The video advises that such changes do not necessarily indicate an immediate trend reversal and could lead to a trading range before the market establishes a new trend.

Outlines

00:00

📊 Introduction to MACD and Its Versatility

MACD (Moving Average Convergence Divergence) is a highly popular indicator among traders, ranging from scalpers to long-term traders. It serves multiple purposes, such as identifying trends, measuring momentum, and evaluating trend strength or weakness. MACD can also be used to discover market reversal points. This video focuses on a specific MACD setting ideal for short-term trading, particularly scalping and day trading.

05:01

🛠️ Setting Up MACD for Short-Term Trading

To set up MACD for short-term trading on TradingView, add the indicator and adjust the settings: set the fast length to 34, slow length to 144, and signal smoothing to 9. Uncheck the MACD and Signal lines in the Style tab to focus solely on the histogram. Use Heikin Ashi chart type for better alignment with the MACD histogram. This setup is designed to identify market direction, not trading signals, and is best used on shorter time frames like the one-minute chart.

📉 Comparing Default and Customized MACD Settings

Comparing the customized MACD settings with the default settings highlights the stability of the custom setup. In an uptrend, the default MACD gives frequent false signals with multiple color changes, while the customized MACD remains consistent. This stability makes it suitable for identifying trend direction, with strategies like taking bullish crossovers during green histogram periods or bearish crossovers during red histogram periods.

🔄 Identifying Trend Changes and Divergences

The customized MACD is used to identify trends and possible trend changes. A well-developed trend showing divergence, such as higher highs in price but lower highs in the histogram, indicates weakening momentum. For instance, a bearish divergence suggests the current uptrend may lose strength, although it doesn't guarantee an immediate reversal. The histogram color should not be used for trading signals but for identifying trend direction and potential changes.

📈 Practical Tips and Conclusion

Traders should note that trend weakening does not necessarily mean an instant reversal; the price might enter a trading range before finding a new direction. The histogram may change colors frequently during such periods. The customized MACD setup aims to identify the current market trend and potential directional changes, not to provide direct trading signals. The video concludes with a thank you to viewers and an invitation to subscribe for more content.

📢 Closing Remarks and Trading Wishes

The video ends with the presenter thanking viewers for watching and encouraging them to leave questions and comments. Viewers are also prompted to subscribe to the channel and hit the notification bell for updates on new videos. The presenter wishes viewers good luck with their trading endeavors.

Keywords

💡MACD

The Moving Average Convergence Divergence (MACD) is a popular trading indicator used to identify trends, measure momentum, and evaluate the strength or weakness of a trend. In the video, MACD is highlighted as a versatile tool suitable for various trading strategies, from scalping to long-term trading. The video discusses specific settings that enhance its effectiveness for short-term trading.

💡Histogram

The histogram in the context of MACD is a graphical representation showing the difference between the MACD line and the signal line. It helps traders identify the strength and direction of the trend. The video emphasizes using the histogram with specific settings to identify market trends and potential reversals more accurately.

💡Trend Identification

Trend identification refers to the process of determining the overall direction of the market. The video discusses how the customized MACD settings can be used to identify current market trends on shorter time frames, which is crucial for making informed trading decisions in scalping and day trading.

💡Momentum

Momentum in trading refers to the speed or strength of price movement in a given direction. The video explains how the MACD can measure momentum and indicates whether the market is gaining or losing strength. This helps traders anticipate potential changes in trend direction.

💡Scalping

Scalping is a trading strategy that involves making numerous trades over short time frames to capture small price movements. The video provides a specific MACD setting suitable for scalping by identifying trends on a one-minute chart, enhancing the accuracy of trading decisions in a fast-paced market environment.

💡Signal Line

The signal line is a moving average of the MACD line and is used to identify changes in momentum. In the video, it is mentioned that the signal line is typically set at a smoothing of 9. However, for the specific method discussed, the signal line is unmarked to focus solely on the histogram for trend identification.

💡Haken Ashi Chart

Haken Ashi charts are a type of candlestick chart that smooths price data to help identify trends more clearly. The video suggests using Haken Ashi charts in conjunction with the MACD histogram to better match the trend and price movements, aiding in clearer trend identification.

💡Bearish Divergence

Bearish divergence occurs when the price of an asset makes higher highs while the MACD histogram makes lower highs, indicating weakening momentum and a potential trend reversal. The video gives examples of bearish divergence to show how it can signal the weakening of an uptrend and a possible market reversal.

💡Bullish Crossover

A bullish crossover happens when the MACD line crosses above the signal line, suggesting that the market may be shifting to an upward trend. The video explains how taking bullish crossovers only when the MACD histogram is green can be a low-risk trading signal aligned with the current market direction.

💡Intraday Time Frames

Intraday time frames refer to trading periods within a single day, such as one-minute, five-minute, or fifteen-minute charts. The video focuses on using the MACD settings for shorter intraday time frames to provide timely trend identification and potential trading opportunities for day traders and scalpers.

Highlights

MACD is a popular indicator among traders for various use cases such as identifying trends, measuring momentum, and evaluating the strength or weakness of a trend.

The video will share a specific MACD setting suitable for identifying trends on shorter time frames, ideal for scalping and day trading.

To set up the MACD on TradingView, search for 'Moving Average Convergence Divergence' and adjust the fast length to 34, slow length to 144, and signal smoothing to 9.

In the style tab, uncheck the MACD and Signal lines to focus on the histogram for this specific method.

Setting the chart type to Haken Ashi chart is recommended for better matching with the MACD histogram.

The MACD setting is used for identifying the current market direction rather than providing trading signals.

The MACD histogram with special settings can clearly show the market trend, turning red during a downtrend and green during an uptrend.

A trading strategy could involve taking bullish crossovers when the MACD is green, indicating low-risk trading signals.

Divergence in the MACD histogram can indicate a weakening trend, suggesting a possible trend stop or reversal.

Bearish divergence occurs when the price makes a higher high but the histogram makes a lower high, signaling a loss of upside momentum.

A bearish divergence increases the probability that the current trend may end, as seen when the price turns to a downtrend.

A deep correction or pullback may cause a slight change in the histogram color before it reverts back to its previous status.

A trading range can lead to continuous color changes in the histogram before the market establishes a clear direction.

The color change of the MACD histogram is not used as a trading signal in this setup; it's for identifying trends and potential changes.

The MACD with default settings can give false signals, making the special settings more consistent during trends.

The video concludes with a reminder that the MACD with special settings is for trend identification and not for direct trading signals.

The presenter encourages viewers to subscribe to the channel and hit the bell for notifications on new videos.

Transcripts

macd is one of the most popular

indicator among traders of any type from

scalpers to long-term Traders it has

different use cases like identifying

Trends measuring momentum and evaluating

strength or weakness of a trend

discovering reversal points of the

market and some other use cases when

used with other tools with different

settings on different time frames it has

different behavior and in this video I'm

gonna share a setting for macd which

makes it an excellent tool for

identifying Trends on shorter time

frames suitable for scalping and day

trading let's add a macd to our chart on

trading view platform here we click on

indicators and we simply search macd

moving average convergence Divergence

this one after adding it to our chart

here we go to add settings and for the

fast length we set it at 34 for slow

length we set it at 144 and for the

signal smoothing 9 is fine then we go to

style Tab and we uncheck macd and Signal

lines because in this method we only

need the histogram we click on OK and

our Mac T is ready for use and trading

it's better to set your chart type on

haken Oshi chart so it will better match

with the macd histogram and advancing of

the price declining of the price and the

pullbacks the time frame here is one

minute and you can use it on other

intraday time frames but it's better to

use this macd settings on shorter time

frames this macd setting is used only

for identifying the current direction of

the market not for trading signals and

you can use it in your trading strategy

alongside with other indicators or if

it's not possible you can have this

setup on different screen or Tab and use

it for discovering direction of the

market and possible changes in the

current Trend as you probably realized

by now you can clearly see how this macd

histogram with the special settings is

matched with the trend of the market

here the market is in a downtrend and

the macd histogram is red in this period

and here the market is in an uptrend and

you can and see that how macd histogram

also responded and turned to a green

histogram to show you how I'm active

with default settings looks like let me

add another macd

and compare them together

in this period of uptrend you can see

how the macd with default settings is

acting lots of changes in the histogram

it turned to Red many times giving false

signals that the trend is possibly

changing and you see how the uptrend

continued its move but for this macd

with the special settings we can see how

it stayed consistent during this uptrend

one trading strategy here could be

taking only bullish crossovers from this

macd while this macd is green these are

low risk trading signals because the

trade entries are in the direction of

the market not against it we have the

same for downtrends while the smack tea

is red we only take bearish crossovers

from this Mac T alright let me close

this macd and give you some important

points here as I said earlier we use

this macd with this special settings

only for identifying Trends and possible

changes in the current Trend when a

trend is well developed and then we have

a Divergence it means that the trend is

probably weakening for example here you

can see that we have a bearish

Divergence the price made higher high

but the histogram made lower high that

shows that the upside momentum is losing

strength and on the other hand the

downside momentum is gaining strength

and there is a possibility that the

trend may stop or a reversal may happen

please pay attention that this is just a

possibility and nothing more as long as

that the macd histogram is green and

above zero the upside momentum is

greater than the downside momentum and

you can see that in this case the price

continued higher but the upside momentum

is really losing a strength another

bearish Divergence happened here giving

more probability that the current trend

is going to end and you can see that

after that the price turned to a

downtrend and with this macd histogram

turning to Red from here all the way up

to here sometimes when we have a deep

correction or pullback like what

happened here we may have a change in

the histogram slightly and after that

turning back to its previous status also

pay attention that when a trend losing a

strength like what happened here it

doesn't necessarily mean that a reversal

is going to happen instantly and the

price may go to a trading range and in

the case of having a trading range we

may have our histogram changing color

continuously before the market Finds Its

Direction and establish a trend that's

why we don't use color changing of this

macd histogram as trading signals with

this macd histogram and these settings

our purpose is not looking for trading

signals we only use this setup for

identifying the current Trend and

possible changes in the direction of the

market alright that's it thank you for

watching this video if you have any

questions feel free to ask and leave a

comment for me I'll answer your

questions as soon as possible if you

haven't subscribed to my Channel Please

Subscribe and hit the Bell so you get

the notifications of my new videos see

you guys in next video and good luck

with your Trading