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Traders who use the MACD indicator oftentimes bemoan the fact that it can signal an entry well after the initial move has begun. In the case of the MACD indicator, the most widely used entry signal is when the MACD line crosses over the Signal Line in the direction of the Daily trend.
A less widely used entry signal generated by the MACD indicator is to make use of the histogram bars. Keep in mind however, as stated in the linked article above, entering a trade sooner means entering with less confirmation and that is not always a good thing. Most technical traders have experience using the more popular oscillators, RSI, CCI, and MACD, etc. The Sell signal on the left was created by four growing bars in a row followed by a fifth bar that closed smaller. This entry strategy is fairly straight forward and can quickly be adopted by a technical trader.


Traders who use the MACD indicator often are critical of the fact that it will signal an entry after the initial move has begun and therefore leave pips behind. For more aggressive traders who are not interested in the additional confirmation and are simply looking for an early entry, they may prefer a less widely used entry signal based on the histogram bars.
Keep in mind however, as stated in the linked article about lagging indicators, entering a trade sooner means entering with less confirmation and that is not always a good thing. Five bars later, we see the MACD line crossing below the Signal line which is a traditional MACD signal. This will provide greater confirmation than just one histogram bar but generally will be a quicker entry than waiting for the MACD Line to crossover the Signal Line. In this article we will discuss how to use MACD’s histogram to open trades and show how in many cases we can get a quicker entry than the traditional MACD method. The actual signal comes when the histogram no longer gets larger and produces a smaller bar.


This later signal would have missed a majority of the move that the Histogram signal would have caught. And, since that crossover is the entry signal, this will get you into the trade after the initial move has begun.
As can be seen on the chart below, although the bearish move has begun, the crossover entry signal has not yet taken place.
Some traders prefer this method of entry as it offers more confirmation that the move is more likely to continue in that direction.



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14.01.2014 | Author: admin



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