Forum transfer: Submitted by Rich on January 31, 2007 - 17:48.
MACD is one of my favorite indicators.
I like 30 min chart for scalping with GBP/USD pair and 2 MACDs: (2, 3, 4) and (5, 26, 1).
In MACD (2, 3, 4) I watch NOT for 2 MACD lines to cross but rather a deviation pattern (bars or a graphical drawing, whatever your chart has, it looks like mountains if you will and it is a reflection of last digit "4" of MACD).
So I watch there for "MACD mountains peaks" to appear on that graphical picture, once peaks are starting to round or suddenly sharpen - I enter the trade + 1 more rule below. It is important to have your chart BIG on the screen to see MACD clear.
I then set my stop slightly over the last price swing on the chart and exit only when this "mountain" plunges through the MACD 0 line and forms another peak on the opposite side. I exit with the first such peak. Strong recommendation: once spotted a mountain peak wait until the current price bar is closed. We are dealing with a follow-up indicator, which means we could become a victim of fake signal more often if we do not wait for a confirmation.
The second MACD (5, 26, 1) appears as one line, you will need to draw a horisontal line through 0 point to watch the deviations.
This MACD shows longer prospective and helps to determine in which direction the market is trending now.
So, adding now second MACD (5, 26, 1) here are that +1 rule I mentioned above, my entry will be next:
I would only open short positions when the MACD (5, 26, 1) line is below MACD 0 point, the line is heading south and MACD (2, 3, 4) is giving me a rounding or sharp "mountain peak" of course it will be mountain which is in upright position (not upside-down).
Accordingly, I will open only long positions when MACD (5, 26, 1) line is above MACD 0 point , it is heading north and MACD (2, 3, 4) is giving me a "mountain peak" for entry this time from up side down mountain which is below the MACD (2 , 3, 4) zero line...
I would ignore all other mountain peaks I saw.
In addition, for MACD (5, 26, 1) when its single line crosses 0 it is a definite signal to enter the trade without any other conditions needed.
There is a picture attached, I hope it will clarify what I'm trying to explain here.