Using MACD to Draw Trend Lines

<<<<<<< HEAD

Help in Drawing Trend Lines

This method seeks to take the subjectivity out of drawing trend lines. By removing this subjectivity the trader may have more confidence in entering trades based on price interaction with the trend line whether the trend line is broken or respected (bounce).  You may also like to look at Peak and Trough Analysis to ID trend...
 
Two types of trend lines can be drawn. These are confirmed trend lines and unconfirmed trend lines. 
 
Confirmed Trend Lines 
 
Confirmed TLs are drawn from the MACD. MACD will show you the swing high and low for the current market then you can draw your trend line through this swing high and low. The Blue Circles identify suggested points to draw the trend lines. Once the two points are connected the TLs are extended to the right. In this chart the upper TL was broken to the upside providing a trading opportunity (Red Arrow).

MACD to Draw Trend Lines
Using The MACD to Draw Trend Lines
 

So confirmed upper trend lines are drawn from MACD peaks where the histogram came from below the zero line to above the zero line and back down below the zero line and
Confirmed lower trend lines are drawn from MACD dips where the histogram came from above the zero line to below the zero line and back up above the zero line. So, the MACD after the 15th Nov needs to cross back over zero before we can draw a confirmed trend line.

Unconfirmed Trend Lines


So how do we draw trend lines when the MACD doesn't cross zero? These "unconfirmed trend lines" are explained in the chart below which shows a MACD to reveal the smaller dips highlighted by the pink down arrows. Ignored by most these dips provide points at which to draw valid TLs. These are unconfirmed TLs as the MACD has not completed a cycle. In this case the TL occurs before the MACD moves back below the zero line. The TL is broken to the downside creating a break-out opportunity. Later the MACD moves below the zero and confirms a TL point. The solid blue line is the confirmed TL and the broken blue line is the unconfirmed TL.

Using MACD to Draw trend lines


To Sum Up

Both these methods of drawing trend lines can obviously be used to Trade the Break-Out and are interesting tools to have at your trading disposal. As ever Technical Analysis is not an exact science and although these ideas can increase the probability of identifying trend and break-out, there're no guarantees that break-out will happen. Your own trading strategy needs to be formed and hopefully you'll be on your way to achieving this on completion of this course.

More...


=======

Help in Drawing Trend Lines

This method seeks to take the subjectivity out of drawing trend lines. By removing this subjectivity the trader may have more confidence in entering trades based on price interaction with the trend line whether the trend line is broken or respected (bounce).  You may also like to look at Peak and Trough Analysis to ID trend...
 
Two types of trend lines can be drawn. These are confirmed trend lines and unconfirmed trend lines. 
 
Confirmed Trend Lines 
 
Confirmed TLs are drawn from the MACD. MACD will show you the swing high and low for the current market then you can draw your trend line through this swing high and low. The Blue Circles identify suggested points to draw the trend lines. Once the two points are connected the TLs are extended to the right. In this chart the upper TL was broken to the upside providing a trading opportunity (Red Arrow).

MACD to Draw Trend Lines
Using The MACD to Draw Trend Lines
 

So confirmed upper trend lines are drawn from MACD peaks where the histogram came from below the zero line to above the zero line and back down below the zero line and
Confirmed lower trend lines are drawn from MACD dips where the histogram came from above the zero line to below the zero line and back up above the zero line. So, the MACD after the 15th Nov needs to cross back over zero before we can draw a confirmed trend line.

Unconfirmed Trend Lines


So how do we draw trend lines when the MACD doesn't cross zero? These "unconfirmed trend lines" are explained in the chart below which shows a MACD to reveal the smaller dips highlighted by the pink down arrows. Ignored by most these dips provide points at which to draw valid TLs. These are unconfirmed TLs as the MACD has not completed a cycle. In this case the TL occurs before the MACD moves back below the zero line. The TL is broken to the downside creating a break-out opportunity. Later the MACD moves below the zero and confirms a TL point. The solid blue line is the confirmed TL and the broken blue line is the unconfirmed TL.

Using MACD to Draw trend lines


To Sum Up

Both these methods of drawing trend lines can obviously be used to Trade the Break-Out and are interesting tools to have at your trading disposal. As ever Technical Analysis is not an exact science and although these ideas can increase the probability of identifying trend and break-out, there're no guarantees that break-out will happen. Your own trading strategy needs to be formed and hopefully you'll be on your way to achieving this on completion of this course.

More...


>>>>>>> c0fd65f8ac5b5830dc3df1d307fcababd602b3a9
Comments