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Tuesday, March 5, 2024

Forex Trading Guide 2021: Strategy “MACD – Convergence / Divergence”

The “MACD – Convergence / Divergence” strategy is based on the use of MACD indicator signals.

When trading this system, we use the indicator settings set in the MT4 terminal by default:

Fast EMA – period value 12

Slow EMA – period value 26

MACD SMA – period value 9

 We will use bullish and bearish divergence signals as points for buying and selling. These signals indicate a possible trend change or trend reversal and the direction of price movement.

Bullish divergence

This divergence is formed when the maximum points on the chart diverge from the indicator readings. When a classic bullish divergence forms, we wait for the MACD-histogram to be below the signal line set on the indicator. When you open the next candle, you need to open a short position.

The stop loss is placed above the previous high by about 10 points. We fix the profit when its size is 2-3 times the size of the stop loss.

Bearish divergence

Similar to the previous algorithm, when a bearish divergence is formed, we wait for the MACD histogram to rise above the signal line. We make a purchase at the opening of the next candle.

The size of the stop loss and take profit are set in the same way as in the case of a bullish divergence.

 Any financial instruments are suitable for using this strategy. It is better to look for divergence at intervals of 4 hours or more.

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