Educational Series: Trading with the MACD (Part 3)

Here we have 3 examples using the MACD & Support/Resistance level

Example 1:
- Price failed to break above the resistance level
- MACD crossover above the zero line
- Sell signal, with SL beyond the resistance and TP at the support

Note: All conditions were met. Upon trade entry, the price is almost immediately in profit and stays in profit until the TP level

Example 2
- Price is moving towards the support level
- MACD crossover above the zero line
- Sell signal, TP at the next support, but SL placement not clearly defined

Note: The price hasn't broken the support, the assumption is for the price to break. Causing a weak SL placement and price retraced after entry (almost to hit SL). Furthermore, it took a long time for the price to reach TP.

Example 3
- Price reversed strongly from the resistance level
- MACD crossover above the zero line
- Sell signal, SL beyond resistance & TP at support.

Note: Terrible Risk:Reward trade because the price has moved strongly lower from the resistance. Remember that the MACD is a lagging indicator. Risk management should rank highest when considering a trade entry.