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Posted by Admin Posted on: 17-May-2014 | MACD gives signals for trend continuation as well as trend reversal and can be used for midterm or short term trading. Now how to imply them:
1. When MACD line (blue colored line) crosses above the signal line (red colored line) then it is a bullish crossover or buy signal else it is a bearish crossover or sell signal when blue colored MACD line crosses below the red colored signal line.(Short Term Trading)
2. Now all these buy and sell signals are not always positive some are false signals as well, now the question is how to avoid those false signal.
3. If a buy signal or bullish crossover is generated when MACD line is above the centerline, then both trend and momentum are in favor to take a Long Term Position example shown below of Reliance Industries. However if a buy signal appears below the centerline or zeroline, then it is not in favor of a major trend.
Basically trading with trend minimise the risk.
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