Today’s futures trading strategies lesson is an indicator called the MACD. These better known as moving average convergence divergence. It’s definitely a mouthful. However, you’ll never hear anybody actually say the full name of it.
You’ll literally just say it Mac D. Kind of like McDonald’s Mickey D. It’s one of the most used indicators for trading and even for investing. A lot of people use it for longer terms, but for the shorter term trading, which is intra day, especially for us intraday, which is during one day the MACD which is right here.
Will be one of your absolute most important indicators to use. Let me change this around and make it more of a rectangle. OK. So what are the manatees? Basically, it shows the strength in the market, for instance, right here. It is very obvious that the market has gone up.
Right, that it is moving upwards and it’s relatively strong. Okay, so you have strong bars until the source of slowdown right here. And this is where you could see what the magazines are telling us right here. It looks like it’s going up and it’s going to operate here.
However, the price is telling me it’s continuing up, yet the MACD’s is showing me divergence and it’s starting to go down. And right here, look what happens. It starts to head down and eventually we start to head down. So this basically it is all potential. You can never say this is the holy grail of trading.
This is potential. But when you are starting to see that the magazines are starting to head down while the price action is going up, chances are that this strung up is going to start to slow down and a new down is going to start down trend.
This is an uptrend. This is a downtrend for day trading. Small trends are crucial because we have such a small risk management on the line. So anything that goes too deep could stop us out and we will lose money. So this is really important to start to notice these things right here. So you focus on the strength of the MACD.
And the strength of the price action, the best is to see when they are together.
Another indication of the MACD’s is right here. This dash line. This is the zero line. Whenever you are up above the zero line strong like right here, you are really high up here. You only set one and a half times more than the zero line that shows strength that is going up the same as here. When is going down your nose?
At point eight. Far away from the zero line. So that’s show strength going down right here. You can see at the price action is really slowing down and even more so. And essentially hanging out around the zero line. So that shows that there’s very little strength in the market. And this is the best time to literally just sit out and wait for you to see what happens.
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