MACD Indicator Explained: 4 Advanced Strategies

Summary

This video offers a comprehensive guide to the MACD indicator, ideal for both beginners and advanced traders. It explains the MACD's components (MACD line, signal line, and histogram) and demonstrates various uses such as histogram slopes, crossovers, zero-line pullbacks, and divergences. Additionally, it presents four advanced trading strategies combining MACD with other concepts like support and resistance, Bollinger Bands, EMA bands, and swap zones. The video aims to enhance trading skills by identifying trade opportunities and applying these techniques in different market conditions.

Takeaways

• 📈 The MACD (Moving Average Convergence Divergence) indicator is used to identify trends and price momentum, consisting of three components: the MACD line, signal line, and histogram.
• 🔍 The MACD line is calculated by subtracting a 26-period EMA from a 12-period EMA, indicating the relationship between short-term and long-term trends.
• 📊 The signal line, a 9-period EMA of the MACD line, serves as a trigger for potential entry points through crossovers.
• 📊 The histogram represents the difference between the MACD line and the signal line, providing insights into the strength and direction of the trend's momentum.
• 📉 An expanding histogram indicates growing momentum in the direction of the trend, while a shrinking histogram suggests weakening momentum and potential trend reversal or sideways movement.
• 🔄 MACD crossovers can provide early signs of trend reversals and better entry points compared to traditional moving average crossovers.
• 🔢 Zero line crossovers by the MACD line indicate shifts in trend momentum and potential trend changes, offering fewer false signals than standard crossovers.
• 🔄 Zero line pullbacks in strong trends can be used to identify high-probability trade entries when the MACD line interacts with the zero line.
• 🔄 Divergence occurs when price action and the MACD histogram show conflicting signals, often signaling a potential trend reversal.
• 📉 Bearish divergence indicates weakening buying pressure, while bullish divergence suggests fading selling pressure, both being potential reversal signals.
• 📈 Advanced strategies combining MACD with other concepts like support/resistance, Bollinger Bands, EMA bands, and swap zones can enhance trading decisions in various market conditions.

Q & A

What is the purpose of the MACD indicator?

The MACD (Moving Average Convergence Divergence) indicator is used to identify trends and momentum of the price in the financial markets.

What are the three components of the MACD indicator?

The three components of the MACD indicator are the MACD line, the signal line, and the histogram.

How is the MACD line calculated?

The MACD line is calculated by subtracting the 26-period EMA (Exponential Moving Average) from the 12-period EMA.

What does the signal line represent in the MACD indicator?

The signal line is a nine-period EMA of the MACD line and is used to provide crossovers as an entry trigger for trades.

How does the histogram in the MACD indicator reflect the price's momentum?

The histogram calculates the distance between the MACD line and the signal line, reflecting the momentum of the price. Green bars above the zero line indicate an uptrend, while red bars below indicate a downtrend.

What does the slope of the histogram indicate about the trend strength?

An expanding histogram indicates a strong trend with growing momentum, while a shrinking histogram suggests that the trend is losing momentum and may reverse or move sideways.

How can the MACD crossover be used as an early sign of a reversal?

The MACD crossover can provide an early indication of a reversal by showing when the MACD line crosses the signal line, which can happen before the price moves significantly.

What is a zero line crossover in the context of the MACD indicator?

A zero line crossover occurs when the MACD line crosses above or below the zero line, indicating a potential shift in trend and momentum.

What is a Divergence in the context of the MACD indicator and why is it significant?

A Divergence occurs when the price and the MACD give different outputs, such as a lower low in price with a higher low in the MACD (bullish divergence) or a higher high in price with a lower high in the MACD (bearish divergence). It is significant as it can signal an impending trend reversal.

How can the MACD indicator be combined with other concepts to create advanced trading strategies?

The MACD indicator can be combined with concepts like support and resistance, Bollinger Bands, EMA bands, and swap zones to create advanced trading strategies that can be used in different market conditions.

What is a swap zone and how is it used in trading strategies with the MACD indicator?

A swap zone is a level that changes its role from resistance to support or vice versa after a breakout. It is used in trading strategies with the MACD indicator to identify potential reversal areas where the price may bounce back after a pullback to the swap zone.

Can you provide an example of a trading strategy using the MACD indicator with Bollinger Bands?

One strategy involves looking for a bearish or bullish Divergence on the MACD while the price is outside the Bollinger Bands. A sell trade entry might occur when the price closes back inside the bands after a bearish Divergence, and a buy trade entry might occur when the price closes above the lower band after a bullish Divergence.

How are EMA bands used in trend-following strategies with the MACD indicator?

EMA bands, calculated on the highs, closes, and lows of the candles, provide dynamic support and resistance levels. In an uptrend, a pullback to these bands followed by a MACD line crossing above the zero line can signal a buy entry. Conversely, in a downtrend, a pullback to the bands followed by a MACD line crossing below the zero line can signal a sell entry.

Outlines

00:00

📈 Introduction to MACD Indicator Guide

This paragraph introduces a comprehensive guide to the MACD (Moving Average Convergence Divergence) indicator, tailored for traders of all levels. It outlines the video's content, which includes the basics of the MACD, its components (MACD line, signal line, and histogram), and its application in identifying trade opportunities through techniques like histogram slope, crossovers, zero line pullbacks, and divergences. The guide also promises to combine MACD with other concepts to form advanced strategies for trading reversals and trends.

05:00

📊 Understanding MACD Components and Market Conditions

This section delves into the MACD indicator's components, explaining how the MACD line is derived from the difference between two exponential moving averages (EMAs), the signal line as a smoothed version of the MACD line, and the histogram as a visual representation of momentum. It discusses how to interpret the histogram's slope and color changes to gauge market trends and potential trade entries or exits. The paragraph also emphasizes the importance of not relying solely on the MACD for trade decisions, suggesting that it will be combined with other factors in advanced strategies.

10:03

🔄 MACD Crossover and Zero Line Applications

The paragraph explores the use of MACD crossovers as an early sign of potential trend reversals, offering better entry points and tighter stop losses compared to traditional moving average crossovers. It also explains the concept of zero line crossovers, which indicate shifts in trend and momentum, and the use of MACD pullbacks to the zero line in strong trending markets as potential entry points for trades. The importance of confirming these signals with additional factors is highlighted to avoid false signals.

15:05

🔄 Divergence as a Reversal Signal

This section introduces the concept of divergence as a powerful tool for spotting trend changes. Divergence occurs when there is a discrepancy between the price action and the MACD indicator, signaling potential exhaustion of momentum and a likely reversal. The paragraph differentiates between bullish and bearish divergences, providing examples of each and emphasizing the importance of identifying clear and obvious divergences for high-probability trades.

20:07

🚀 Advanced MACD Trading Strategies

The paragraph outlines four advanced trading strategies that incorporate the MACD indicator. The first two strategies focus on reversal setups, combining divergence with support and resistance levels or Bollinger Bands, to identify high-probability trade entries. The latter two strategies are trend-following, using EMA bands and swap zones in conjunction with the MACD to capitalize on pullbacks in strong trends. Each strategy is designed to address different market conditions, providing a versatile approach to trading with the MACD indicator.

25:08

📉 Final Thoughts on Trading with MACD

In the concluding paragraph, the video summarizes the uses of the MACD indicator and the four advanced trading strategies discussed. It invites viewers to share suggestions for future topics and to provide feedback on the video. The paragraph also encourages viewers to like, subscribe, and follow the channel on Instagram for more content, emphasizing the value provided and the desire for viewer engagement.

Keywords

💡MACD

MACD stands for Moving Average Convergence Divergence and is a technical indicator used by traders to identify trends and momentum in the price of a security. It consists of three components: the MACD line, the signal line, and the histogram. In the video, MACD is the central theme, with its explanation and application in trading strategies being the primary focus.

💡EMA

EMA, or Exponential Moving Average, is a type of moving average that places a greater weight and significance on the most recent data points. It is used in calculating the MACD line by subtracting the 26-period EMA from the 12-period EMA. The script mentions EMA in the context of forming the MACD line and as part of the strategy involving EMA bands.

💡Histogram

The histogram in the MACD indicator is a visual representation of the difference between the MACD line and the signal line. When the MACD line is above the signal line, the histogram shows green bars, indicating an uptrend. Conversely, red bars indicate a downtrend. The script explains how the histogram's slope and color can signal the strength or weakness of a trend.

💡Crossover

A crossover in the MACD occurs when the MACD line crosses the signal line. This can be an early sign of a trend reversal and is used as an entry trigger in trading. The video script discusses both MACD line crossovers and zero line crossovers as part of different trading strategies.

💡Divergence

Divergence occurs when the price action and the MACD indicator show conflicting signals. A bullish divergence happens when the price makes a lower low but the MACD makes a higher low, suggesting a potential upward price movement. The script uses divergence as a critical concept for spotting trend changes and as part of the trading strategies.

💡Support and Resistance

Support and resistance levels are price points on a chart where the price tends to stop and reverse. Support is where buyers are expected to enter, and resistance is where sellers are expected to take over. The script discusses using these levels in conjunction with MACD divergences for trading setups.

💡Bollinger Bands

Bollinger Bands are a volatility indicator that consists of a middle band being a simple moving average, and an upper and lower band that are two standard deviations away from the middle band. The script mentions using Bollinger Bands in combination with MACD divergences to trade reversals.

💡Zero Line

The zero line in the MACD indicator represents the midpoint and is used to determine the overall trend direction. When the MACD line crosses above the zero line, it suggests an uptrend, and when it crosses below, it suggests a downtrend. The video script refers to zero line crossovers and pullbacks as part of the trading strategies.

💡EMA Bands

EMA Bands, as discussed in the script, are a set of three exponential moving averages calculated using different sources (highs, closes, lows) of candlestick data. They are used to identify support and resistance levels in trending markets. The script explains using EMA bands in conjunction with the MACD for trend-following trades.

💡Swap Zones

Swap Zones refer to the concept where a resistance level becomes a support level after a breakout and vice versa. The script uses this concept in a trading strategy where the MACD and swap zones are combined to trade pullbacks in the market.

Highlights

The MACD indicator is used to identify trends and momentum of the price.

MACD stands for Moving Average Convergence Divergence.

The MACD indicator consists of three components: the MACD line, the signal line, and the histogram.

The MACD line is calculated by subtracting the 26 period EMA from the 12 period EMA.

The signal line is a nine period EMA of the MACD line, providing entry triggers through crossovers.

The histogram reflects the distance between the MACD line and the signal line, indicating momentum.

Histogram slope and expansion can signal growing or weakening momentum and potential trend direction.

MACD crossovers can provide early signs of reversal and better entry points than traditional moving averages.

Zero line crossovers by the MACD line indicate shifts in trend and momentum.

Divergence occurs when price and MACD give different outputs, signaling potential trend changes.

Bullish divergence suggests weakening sellers' momentum, while bearish divergence indicates weakening buyers' momentum.

Combining MACD with support and resistance levels can create high-probability reversal setups.

Bollinger Bands combined with MACD Divergence can indicate reversals when price moves outside the bands.

EMA bands created from highs, closes, and lows can provide support and resistance in trending markets.

Swap zones, where support and resistance levels swap roles, can be used with MACD for pullback trades.

Four advanced MACD strategies are discussed for trading reversals and trends in different market conditions.

Divergence should be clear and obvious to the naked eye for reliable trading signals.

Transcripts

in this video we have collected

information from various sources to

provide a complete guide to the macd

indicator

we created this video course for the

Trader at entry level so if you are a

beginner or an advanced Trader watch the

full video to grasp every Concept in

detail

here are the topics covered in this

course

we will cover the basics of the macd

indicator including what it is and how

it works

we will accomplish this by understanding

the components of the macd such as the

macd line signal line and histogram

next we will dive deep into the uses of

the macd indicator including the

histogram slope crossovers zero line

crossovers zero line pullbacks and

divergences

you will learn how to use these

techniques to identify trade

opportunities

finally we will combine the uses of macd

with other Concepts to create four

Advanced strategies you can use to trade

different market conditions

you will learn how to use the macd to

trade reversals and trends

so without any further Ado let's get

started

what is the macd indicator

macd stands for moving average

convergence Divergence it is used to

identify Trends and momentum of the

price

the macd indicator consists of three

components the macd line the signal line

and the histogram

let's understand each of these

components in detail

first let's start with the macd line

the macd line is calculated by

subtracting the 26 period EMA from the

12 period EMA

this means that whenever the 12 EMA is

above the 26 EMA the macd line will be

above zero

when the 12 EMA moves below the 26 EMA

the macd line goes below zero

next we have the signal line

the signal line is a nine period

exponential moving average of the macd

line

the signal line aims to provide

crossovers as an entry trigger

lastly we have the histogram

the histogram calculates the distance

between the macd line and the signal

line

by doing so it gives us a better

understanding of the momentum

when the macd line is above the signal

line the histogram will show Green bars

above the zero line

this shows us that the price is in an

uptrend

[Music]

on the other hand when the macd line is

below the signal line the histogram will

show red bars below the zero line

so these are the three components of the

macd

we have the macd line the signal line

and the histogram

now let's understand how to use these

components in different market

conditions

use one histogram slope

the slope or shape of the histogram

gives us a deeper understanding of the

trend

when the price is in a strong Trend the

distance between the macd line and the

signal line increases as a result the

histogram expands

an expanding histogram is a sign of

growing momentum

therefore if the histogram is expanding

we should look for entries in the

direction of the trend

as the trend gets weak the histogram

starts to shrink

this is a sign that the momentum of the

move is lost and the price might reverse

or stay sideways

during such times it is better to exit

our trades and wait for the price to

generate momentum again

for a better visual presentation the

macd histogram on trading view has light

and dark colors

we see dark colors when the histogram is

expanding and light colors when the

histogram is shrinking

at the beginning of an up move when you

see two or more dark green bars with an

expanding histogram it is a sign that

the upwards momentum is solid and

growing

therefore it is an excellent opportunity

to look for buying entries

then when the histogram starts to fall

or decrease in size it is time to get

out of the trade

this indicates that the momentum has

decreased and a reversal or a sideways

Trend May establish itself

as you can see the shrinking of the

histogram coincides with this sideways

range

then we have this down move

at the beginning of the down move we see

these dark red bars with an expanding

histogram

if you haven't already this is your last

chance to exit your previous buy

positions

these dark red bars sign that new

sellers have entered the markets and

they are moving the markets with heavy

momentum

it's time to enter new cell trades

then once the price moves a certain

distance the histogram starts to shrink

as we see these light red bars

it is an early indication that the down

move is losing momentum and a reversal

or sideways range May establish itself

and as you can see the price stayed

sideways as the histogram shrank itself

again a point to remember here is that

this is just one use of the macd you

cannot make trade decisions based on

this one factor alone

we will show you how to combine it with

other factors in the advanced strategies

if you are enjoying this video so far

then be sure to hit the like button and

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any of our videos

you can also follow us on Instagram by

clicking the link in the description

below

now moving on to the second use

two crossovers

a lot of Traders like to use the moving

average crossover system for their

trading but crossovers happen only after

a good move in price

as a result our entries are late and the

price has already moved a lot to address

this problem we could use the macd

crossover

the macd crossover can give you an early

sign of a reversal it can also provide

you with better entries and smaller stop

losses

to prove this I have plotted the 12 and

26 EMAs on the chart along with the macd

as you already know the macd is

calculated on the 12 and 26 EMA so this

should be a fair comparison

here is the reversal point

from this point the price reversed from

an uptrend to a downtrend

the crossover for the moving averages

occurred here

so your entry would be on this candle

as you can see the price had already

moved quite some distance before giving

the crossover signal

so ideally your stop loss would be above

this High which is quite a wide stop

loss

but if you look at the macd your entry

signal would be on this candle as the

macd line crossed below the signal line

it gives you a far superior entry price

with a tight stop loss as a result you

capture a bigger portion of the price

move

here is another example we can see that

the 12 EMA crossed above the 26 EMA on

this candle it is a bullish crossover so

a buy entry occurs here

but the crossover happens only after the

price has moved a certain distance on

the other hand the macd crossover

occurred here giving us a far better

entry price

as a result we captured a good portion

of this move with a tighter stop loss

macd crossovers can be an early sign of

reversal but they generate far more

false signals so we can't use these

crossovers in isolation a more confirmed

signal is the zero line crossover

foreign

use three zero line crossover

the macd consists of a zero line which

is known as the midpoint of the

indicator when the 12 EMA crosses below

the 26 EMA the macd line moves below the

zero line

this shows that the trend and momentum

have shifted downwards and a downtrend

may start

similarly when the 12 EMA crosses above

the 26 EMA the macd line moves above the

zero line

this shows that the trend and momentum

have shifted upwards and the price may

start an uptrend now

the zero line crossovers give fewer

false signals but again we need to add

more confirmations for them to be high

probability trades

use 4 zero line pullbacks

in strong trending markets the macd line

will often pull back to the zero line

and the price will bounce back

so in an uptrend if the macd line pulls

back to the zero line it is a good place

to make buy trades but again we cannot

randomly buy whenever the macd line

reaches zero

we must wait for the macd line to cross

above the signal line to make a Buy

trade

similarly in a downtrend if the macd

line pulls back to the zero line it is a

good place to make cell entries

we wait for the macd line to cross below

the signal line we enter on the

crossover

now moving on to the last use

5 Divergence

Divergence is a sign of reversal and it

can be very helpful in spotting Trend

changes

a Divergence occurs when the price and

the macd give different outputs

we will use the histogram to spot these

divergences

divergences are of two types A bullish

Divergence and a bearish Divergence

a bullish Divergence occurs when the

price makes a lower low but the macd

makes a higher low

this shows that the momentum on the last

down move was lesser than the prior down

move

it is a sign that the sellers are tired

and the price will likely stall or

reverse

here is an example

here the price was in a downtrend the

price created these three lower lows

each low being lower than the previous

one

however the macd makes higher lows this

is a clear Divergence it shows that the

sellers are losing their strength and a

reversal may occur so this becomes a

good Buy Signal

[Music]

now let's understand the bearish

Divergence

a bearish Divergence occurs when the

price makes a higher high but the macd

makes a lower high

this shows that the momentum on the last

up move was lesser than the prior up

move

it is a sign that the buyers are tired

and the price will likely stall or

reverse

here's an example

here the price was initially in an

uptrend

the price makes a higher high but on the

macd we see lower highs this is a clear

bearish Divergence it is a sign that the

buyers are losing momentum and strength

as a consequence the sellers might jump

in and take these prices downwards

a lot of Traders find it difficult to

find entries on divergences but don't

worry we will show you our special

technique in the strategies section

a quick note about Divergence only look

at divergences if they are clear and

obvious it should be apparent to the

naked eye

here is an example

here the price made this higher high but

on the macd we have a lower Highs but

the Divergence is not very clear on the

macd

these two tops seem equal to the naked

eye

we need a close examination to see if

the second top is lower than the first

so the best thing to do here is to avoid

such divergences

on the other hand this was a clear

Divergence

the price makes higher Highs but the

macd makes lower highs we should look

for these types of divergences

divergences that are obvious to the eye

can be very powerful so these were the

five uses of the macd indicator

now let's discuss the strategies that

can be created around the macd indicator

the first two strategies are reversal

setups

while the last two are Trend following

setups

these four strategies will enable you to

trade the markets in any condition

you can use these reversal setups when

the price is in a range-bound market

and during strong Trends the trend

following strategies will help you catch

pullbacks

strategy one

Divergence plus support and resistance

as we already discussed Divergence is a

strong sign of reversal but we cannot

trade every Divergence

we need to identify potential reversal

areas and wait for the macd to create

Divergence around those areas

for this we will use the concepts of

support and resistance

we will first identify the support and

resistance levels on a higher time frame

then wait for Divergence on a lower time

frame

here is an example

we have the GBP USD pair on the four

hour chart

the price made an up move and then

reversed so we plot a level of

resistance here

when the price arrives near the

resistance for the second time we expect

the price to reverse downwards again

so we switch to a one hour chart to look

for Divergence

here is the same price action on a one

hour chart

we see that the price made a higher high

coming into the resistance level

but on the macd we see lower highs

this is a clear and obvious bearish

Divergence

it tells us that the buyers have lost

momentum coming into the resistance

we have a Confluence of a resistance

level with Divergence

this is a high probability trade

therefore we should look out for a sell

trade

for our entry we need to identify the

lowest point between the tops on the

macd

these are the two tops

here is the lowest point between them we

draw a line at that bar

then we wait for the histogram to break

below that line

on this bar the histogram breaks below

the line

so we enter a sell trade on the

corresponding candle

as you can see we saw a steep down move

after our entry

here is an example of a buy setup

we have the USD JPY on a four hour chart

this upside reversal helped us identify

this support level

when the price returns to this level we

expect the price to find support and

move upwards

so we switch to a one hour time frame

and look for a bullish Divergence

the price makes a lower low coming into

the support Zone

but on the macd we see a higher low

this is a clear and obvious Divergence

it shows us that the sellers have lost

their strength and momentum in this down

move so we identify this as a high

probability trade setup

now we Mark the highest point between

the bottoms on the macd and draw a line

on this bar the histogram breaks above

the line and it is a Buy Signal so we

buy here

as you can see the price made an up move

and touched the most recent highs

so this is how to use the Divergence

with concepts of support and resistance

now let's look at the second strategy

strategy two Divergence plus Bollinger

Bands

Bollinger Bands are a very popular

indicator that Traders use to trade

reversals

the theory is this

ninety percent of the time the price is

expected to stay Within These bands

so whenever the price moves outside the

bands we can expect the price to reverse

and return inside

if the price moves above the upper band

we expect it to reverse downwards

similarly if the price moves below the

lower band we expect the price to

reverse upwards

we will combine this analogy with the

macd Divergence

but first we will go over the Bollinger

band settings and change the length to

200. we will keep the standard deviation

to two

this gives Bollinger Bands on the 200

moving average

here is a cell setup using this strategy

here we see that the price was in an

uptrend

the trend was so strong that the price

stayed above the upper Bollinger band

for an extended period

now we expect the price to move lower

so we look for a bearish Divergence

here the price made a higher high but

the macd histogram made a lower high

in fact on the second top we don't even

see a green bar

this is a great sign that the sellers

have grabbed hold of the markets and the

price will follow soon so a selling

opportunity presents itself

for this strategy our entry occurs on

the first candle that closes back inside

the Bands

so this will be our entry candle

and as you can see the price made a

solid down move after our entry

moving on to buy trade

initially we saw a massive down move

that stayed below the lower band

the price spends a lot of time below the

band we know that the price cannot spend

so much time outside the bands so we are

already expecting a reversal to the

upside

towards the end of the move we see the

price was constantly making lower lows

but the macd histogram was plotting

higher lows this was a clear and obvious

Divergence we have a combination of the

Bollinger Bands and the macd Divergence

it indicates that the sellers have lost

all momentum coming into the down move

the buyers are pushing hard and an

upwards reversal may occur soon

so we should look for a Buy trade

our buy entry occurs as the price closes

above the lower band on this candle

as you can see the price shot up after

our entry

so this was a unique way of trading macd

Divergence with Bollinger Bands

now moving on to the trend trading

strategies

strategy 3 EMA bands plus zero line

pullbacks

for this strategy we will need four

indicators we need the macd and the

three exponential moving averages

all three of them are 200 EMAs but with

different sources

the upper EMA is calculated on the highs

of the candles

the middle EMA is calculated on the

close and the lower EMA is calculated on

the lows

for trading view users you can use the

moving average ribbon indicator

just go to the indicators section and

search moving average ribbon select this

indicator

and change the settings to the following

once done your chart should look

something like this

now we have these moving average bands

that will help us identify trade

opportunities when the price is trending

these bands will provide support and

resistance to the price

in an uptrend we often see that the

price pulls back to these moving

averages and finds support

similarly in a downtrend the price pulls

back to these moving averages and finds

resistance

a point worth remembering here is that

price will not always bounce exactly

from the Bands sometimes the price goes

deeper before reversing

now let's combine this with the macd and

create a strategy here is a buy setup

the price made a strong up move here

the price stayed above the bands and the

bands were sloped upwards

this is a sign that the price is in an

uptrend

then the price pulls back to the EMA

bans

now we expect the price to find support

here and move upwards

we also see that the macd line has

crossed below the zero line

in an uptrend we expect the price to

bounce after the macd touches the zero

line

this is also a sign that the pullback

might be over and that the price May

resume the uptrend again

so now we have a confirmation of the

macd and the EMA bands

for our entry we will not use the macd

line crossover macd crossovers are good

for reversals but they are not so good

for pullbacks

most of the time they will provide a

late entry in pullbacks

for a better entry we will create a

short-term trend line on the pullback

and enter on its Breakout

as you can see the price made a strong

up move after our entry

here is a sell trade

we see that the price was consistently

trading below the EMA bans and the bans

were sloped downwards

this is a sign that the price was in a

strong downtrend

price pulls back to the Bands

we expect the price to find resistance

at these bands and move lower

we also see that the macd has crossed

above its zero line

this also indicates that the price may

start a down move again

therefore we have a Confluence of the

macd and the EMA bands

now we create a short-term trend line

and wait for the price to break it

on this candle the price broke below the

trend line

we enter a sell trade

as you can see the price moved downwards

after our entry

foreign

strategy

strategy 4. swap zones plus zero line

pullbacks

if you trade support and resistance you

might know that the support and

resistance have dual properties

this means a resistance level can become

a support level after a Breakout

similarly a support level can act as

resistance after its breakdown

this is why we call them swap zones they

swap roles with each other

we will use this concept with the macd

to trade this strategy here we see that

the price was in a steady uptrend

we spot this reversal here and plot a

resistance level

then the price broke above the

resistance level

therefore the resistance level has now

turned into a support level

when the price pulls back to the support

level we expect the price to bounce and

move upwards

we also see that the macd line is below

zero showing signs of support

we spot this doji right at the support

level and enter a Buy trade

and as you can see the price shoots up

and trades higher

here is a sell trade

here the price was in a downtrend as it

moved lower

this reversal Point helped us identify a

support level

then the price broke below it turning

the support into a resistance level

when the price pulls back to the

resistance level we expect the price to

bounce

we also see that the macd has moved

above the zero line

so we enter a sell trade when we see

this evening star Candlestick pattern

and as you can see the price moved lower

so this is how you trade using the macd

in this video we first understood the

uses of the macd indicator

then we discussed four Advanced trading

strategies using it

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