Day and swing trade like a pro stocks, Forex, commodities,
futures and options. Trade financial markets using free proprietary trading.

Stochastic, MACD, Bollinger Bands Plus Day And Swing Traders

Learn How To Day And Swing Trade Using Stochastic, MACD, Bollinger Bands Like A Pro

Image = MACD signal line in action.

MACD Signal Line Key Points

MACD signal line key points is about a clear understanding of how to

analyse, interpret and trade MACD signal line like a pro.

MACD Signal Line Key Point One

The signal line of the standard MACD
(12, 26, 9) is the moving average nine
of the MACD itself. Similarly, the signal
line of a non-standard MACD (20, 34, 8)
is the moving average eight of MACD (20) itself.
In general a customized MACD indicator (X, Y, Z) indicates that the signal

line is the moving average Z of MACD (X, Y, Z).

MACD Signal Line Key Point Two

The purpose of the MACD signal line is to indicate the slope of MACD.

If the indicator has a negative slope (MACD indicator is declining), MACD

will remains below the signal line. Conversely, MACD is above its signal

line indicates a positively sloping MACD oscillator.

Consequently, one ought to check MACD's slope to ascertain whether MACD

is becoming bearish or bullish. Indeed, it is not sufficient to rely on MACD signal

line crossovers. Look and check if the indicator is declining or not.

In fact, there are times when there is a divergence between MACD slope and

its signal line crossovers

MACD Signal Line Key Point Three

In a normal condition, when MACD is below its signal line, it also signifies that

the price is below its common sense trend line. Similarly, when the indicator has a positive slope, it means that the price is currently above the common sense trend line or above a positive slope trend line.

Subsequently, one may substitute MACD
signal line crossover with the price and common sense trend line crossovers.
In reality, it is more effective to use trend lines instead of MACD signal line crossovers.

MACD Signal Line Key Point Four

MACD signal line crossover is similar to the moving averages crossover. One should

not buy straight away when a bullish crossover occurs or sell right away when a bearish

one takes place.
Moreover, the best bullish crossovers are those that appear after the completion of

a bullish chart pattern. For example, a double bottom chart pattern is in place at the same

time when MACD indicator just crosses above the signal line. Conversely, the best bearish crossovers

take place after a bearish chart pattern (example: double top chart pattern).