Scalping With MA And MACD

Scalping With MA And MACD  

The combined method of moving average (MA) and MACD indicators is often practiced by scalpers and daily traders. Time frames for entry can be 1 hour (1-hour) or lower (30 minutes or 15 minutes), while the time frame for the trend direction is usually 1-hour, 4-hour (4-hour) or daily. This method is often used because MACD can run well at all time frame trading.

Determining Trend Directions

For the scalper, the time frame of 1 hour and 4 hours is often used to determine the direction of the current trend before determining the entry position at a lower time frame. The popular and frequently used trend indicator is the Average Directional Index (ADX), but because at low time frames the response of this indicator tends to be slow (lagging), the scalper often uses the moving average.

To increase the sensitivity of moving averages that are also lagging, an exponential moving average (EMA) type is calculated by weighting at the final price. In practice, EMA is accurate enough to show the direction of the current trend.

 In the following GBP / USD 4-hour example, the period EMA 55 is used as a trend detector tool. Rules:

• When the price moves above the EMA-55 indicator curve, the price is considered uptrend move and the trader will only look for a buy opportunity.

• Conversely, when the price is under the EMA-55 curve, it is considered downtrend and the trader will only look for sell opportunities.

 Determining the Momentum Entry

After knowing the position of the desired entry, traders can determine the entry (timing) by looking at the MACD indicator and OSMA histogram. Entry does not have to be on 4-hour time frame, but can be at lower time frame according to trader's habit.

Buy if the MACD curve has crossed the signal line from the bottom up and at the same time the OSMA histogram is moving above the 0.00 level. Under these circumstances, uptrend momentum is strong, and the wider the distance between the MACD curve and the signal line the stronger the trend.

Exit when the MACD curve has cut the signal line from top to bottom and at the same time the OSMA histogram is moving below the 0.00 level. Under these conditions, uptrend momentum is weakening and possibly the price will reverse direction.

For entry sell apply otherwise. Sell when MACD cuts the signal line from top to bottom and OSMA moves below the 0.00 level. Then, exit if MACD cuts the signal line from bottom to top and OSMA above level 0.00.

With this method the stop level can be determined rather tightly, and no matter how much risk / reward ratio is planned, the trader must exit when the trend's momentum has started to weaken.