Scalping with Moving Averages Convergence/Divergence Indicator (MACD) Indicator
Scalping

Scalping with Moving Averages Convergence/Divergence Indicator (MACD) Indicator

15 September 2014, 12:11
Patti
Patti
0
5 892
  • What’s moving the market this morning?
  • Which markets are most active?
  • What drivers (or news) might come out to push the market further?

The Setup

Before a scalper ever triggers a position they need to first find the appropriate market environment. Multiple Time Frame Analysis can be helpful but more important is the fact that that outlook or opinion should mesh with the ‘bigger picture’ view of what’s going on at the moment.

For scalpers, the hourly and 4-hour charts carry special importance, as those are the ideal timeframes for seeing the bigger picture. After that, traders should look to diagnose the trend.

A great indicator for investigating trend strength is the Average Directional Index (ADX). Also popular for investigating trends is the Moving Average Indicator.


The Entry

After the day-trader has found a promising setup, they then need to decide how to trigger into positions, and MACD can be a very relevant option for such situations - they merely need to wait for a corresponding signal via MACD to initiate the position.

When MACD crosses up and over the signal line, the trader can look to go long.

After a long position is triggered, the trader can look to close the position when MACD moves down and under the signal line (which is usually looked at as a sell signal, but because you did the ‘bigger picture analysis’ with the longer-term chart, this is merely a ‘close the long signal.’)

Scalpers can trigger positions when MACD Signal takes place in correct direction:


If the trader had determined the trend to be down on the longer-term chart or if their fundamental bias is pointing lower, they can look for MACD to cross down and under the signal line to trigger their short position. Once MACD crosses up and over the signal line, the trader can look for short position.

Scalpers can close positions when opposing MACD Signal takes place:



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