It can be extremely difficult for new traders to finalize a trading strategy for trading the Forex market. The options for market entry are virtually unlimited, and it is often good to have a simple strategy on standby. Today we are going to review the basics of a simple MACD strategy, based on finding the trend then utilizing an indicator for execution.
So let’s get started!
The first step to trading any successful trend based strategy is to find the trend! One of easiest ways to find the trend is through the drawing of a trendline. Traders can connect the lows in an uptrend and find a clear area of where price is supported. Below we can find an ascending trendline on the EURCAD.
Given the information above, traders should look to buy the EURCAD as long as it remains supported. If the trend continues, expectations are that price will remain above support and new highs will be created.
Learn Forex –EURCAD Trendline
Once a trendline is drawn, and a trading bias has been established traders will begin looking for areas to enter new positions. One of the easiest ways to find a technical trigger is through the use of an indicator. Below we can see the EURCAD daily graph, this time with MACD added. Since we have identified the EURCAD in an uptrend traders will look to buy when the MACD when momentum returns to the underlying currency pair. This occurs whenthe Red MACD line to crossover the Blue Signal line, prior to executing their orders.
Below you will find several examples of past MACD crossoverson the EURCAD. Note how only buy positions are to be taken on bullish crossovers as the uptrend continues.
Learn Forex – EURUSD & CCI
When trading markets, there will always be a degree of risk. When trading trends, it is important to know that they will eventually come to an end. In an uptrend like the EURCAD, traders may place stops under the established line of trendline support. In the event that price breaks under support, traders will wish to exit any existing positions and look for other opportunities.
—Written by Walker England, Trading Instructor
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