Bullish MACD Strategy
This strategy may sound a little hard to comprehend at first, but the Bullish MACD trading strategy is actually quite simple to understand and to apply to your trading. All you really need to know is what MACD actually is.
What Is MACD?
MACD is a type of indicator which falls into the moving average indicator category, and it actually stands for Moving Average Convergence Divergence. The MACD moving average indicator is a great way to identify upward trends in the market. In other words, if you use the MACD charts right, you can easily identify upward trends, or in other words, bullish trends (rising prices). In essence, MACD is a short term momentum indicator.
The Parts of MACD
The MACD charts consist of 3 main components which you need to understand to use this indicator to accurately predict bullish market trends.
MACD Line – This line shows you the distance in prices between 2 moving averages. This is usually set to either a 12 day or 26 day period.
Signal Line – This line is usually set to a 9 day EMA period. This is the indicator line you will use to identify when it is time to buy or sell; this is your call signal.
Histograph Line – The histograph line indicates the difference between the MACD and the signal line. The histogram line will be at zero when both of the previous 2 lines meet.
Identifying A Bullish Signal.
Using the MACD indicators to make a profitable trade is really quite easy. All you need to do is to watch for the time when the MACD line crosses the signal line. There is an upward trend when the MACD line crosses the signal line (and moves above the signal line), which means that it is time to buy.
You can also use the histograph line to achieve the same thing. Simply put, when the histograph line reaches zero you know that the MACD line has crossed above the signal line, thus letting you know that the time to make a call trade is upon you.