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.