MACD & Finding the Trend’s End

Yesterday I discussed EMA profit divergence for online forex trading. Today I’m going to show you how to use the MACD (moving average convergence divergence) to spot the end of a trend and how to exit a trader early.
The MACD provides essentially the same information as the double ema signal I mentioned yesterday. But the MACD plots the information different graphically.
This gives you different insight into when the trend is “losing steam.”

EMA or MACD?

Both EMA and MACD are valuable when used together. The gap divergence between candlestick & fast ema signal (discussed in yesterday’s video & today’s video below) is a great visual signal that the current price wave is nearing it’s peak. It usually reveals a price very close to the actual high.
But some times the trend will keep going. Although the MACD doesn’t signal this perfectly (anything can happen), it is a fairly reliable indicator to spot the end of a trend, or in other words a potential trend reversal.

MACD Video

The video below walks you through a 5 minute chart with the EMA/MACD setup. I intentionally “play dumb” as much as possible to follow the logic of what you’d be thinking as you read the signals.

This requires a little bit of practice, but it’s worth understanding as it’s one of the most basic (and useful) tools used by traders for online forex trading.

Smaller MACD Peaks

When the MACD reaches a peak (for an uptrend) or a valley (in a downtrend), it signals the near extreme of the price movement.

The shape the MACD makes is like a little hill, or mound. I call this the MACD mound.

If the MACD Mound is like a mountain, the trend will likely retrace a bit & then continue in the trend direction.

If the MACD Mound is like a hill (or at least much smaller than previous mounds), the trend will likely reverse and then move in the opposite direction.

Whether the MACD Mound is a hill or a mountain, when reaching the peak of the mound (maximum divergence) it signals the end of the current price wave.

I’ll explain more about how to use this concept in future rapid forex blog posts and videos

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