How to use MACD as confirmation to EMA cross

[eurusdzn]

Hello,

I have been looking for trading strategy involving EMA cross with MACD as a confirmation. I see alot on the internet. Basically, buy when 2 EMAs cross and MACD above 0. Opposite for sell.

Can someone please explain (with a visual example) with an example how the MACD confirms an EMA cross? Does this mean the MACD above 0 is delayed after the EMA cross.?

Thank you

Maybe what that system is implying is trade with the trend and use the MACD above zero condition to assist with the definition of trend.
Just an example..if you use MACD 12,26,9 default do YOU define "with" trend when the 12 crosses the 26 and stays there? MACD is now above zero after the cross and now you can take
signals from crossovers of a faster EMA's to buy.

Why ask? Test to see if this is any good. Maybe this occurs well after a change of trend and is late.

You have 4 EMA's on the chart so what are you trying to do with that?

 

[SimpleMeLike]

What you're looking for is a confirmation that price will continue to rise (it's already risen somewhat or else the MAs would not have crossed). Indicators will not do that for you. Look for something else in the chart that will suggest more buying interest than selling interest.

Thank you lcranston,

Why so many strategies I see only say indicators can be used for 2nd confirmation that price will continue to rise after ema cross? I am not sure I understand.

 

[SimpleMeLike]

Maybe what that system is implying is trade with the trend and use the MACD above zero condition to assist with the definition of trend.
Just an example..if you use MACD 12,26,9 default do YOU define "with" trend when the 12 crosses the 26 and stays there? MACD is now above zero after the cross and now you can take
signals from crossovers of a faster EMA's to buy.

Why ask? Test to see if this is any good. Maybe this occurs well after a change of trend and is late.

You have 4 EMA's on the chart so what are you trying to do with that?

Thank you,

Yes this is what is am doing, look for the strategy online, then test out for understanding with some sim or backtest.

This is for trending strategy only. I get strategy from online Google just testing out.

Please see the picture. I took screen shot cause at work now and can't get to computer.

You see the ema cross, but mac red line take long time to cross below 0 line. It's not cross yet, but when it cross I go short.

Is the delay in macd to cross the 0 line down considered the 2nd confirmation of the trend down Just trying to understand.

Thank you

 

[Turveyd]

Macd is just the diference between 2 emas, you can put those ema,s on you chart and trade that cross, its easier to see.

Trading with the current momo gives you a shot that it will continue, it won't always, this basic method will work BUT you'll have to exit cheapily and let profits run, without getting greedy.

Issue being your always on your own for exits, everthing will lag to much

 

[lcranston]

Thank you lcranston,

Why so many strategies I see only say indicators can be used for 2nd confirmation that price will continue to rise after ema cross? I am not sure I understand.

Indicators won't guarantee anything, but then neither will anything else. Price is gonna do what price is gonna do, and what price does will depend on the decisions made by millions of traders at any given moment all over the world. First learn how to tell the difference between a price that's rising, a price that's falling, and a price that isn't doing either. I suggest you look at this: Trading Price.

 

[_eug_]

I look at the MACD to confirm what price is doing and to help tie the different time frames.

 

[carrer]

Issue is not "both are price derivatives" and therefore should be "considered equally"... rather that MACD is a "later to the party" indicator because it's a 2nd derivative of price.

If asked for my opinion about MACD... I'd recommend to ignore completely.

Just a quick question.

Do you use any indicator? If yes, what are they (if you feel comfortable revealing them)?
Or do you only trade based on price action or candle?

 

[Scataphagos]

Just a quick question.

Do you use any indicator? If yes, what are they (if you feel comfortable revealing them)?
Or do you only trade based on price action or candle?

I can see some value in the "range indicators".... Stochastic, RSI, CCI, %R. You have to spend some time with them to extract their value. It's not as simple as "buy oversold, sell overbought".

Nothing special about candles... as a trader you should get your position "in tune" with price as best you can manage. Nothing beyond that matters.

 

[spindr0]

Can someone please explain (with a visual example) with an example how the MACD confirms an EMA cross? Does this mean the MACD above 0 is delayed after the EMA cross.

Indicator based on moving averages lag the market. MACD is one of them. Lag means in late, out late with a higher likelihood of missing a chunk of the move as well as whipsaws in non trending markets.

The reason for the buy above zero criteria (or below zero for a short) is the nature of its mathematical construction. An indicator buy signal (it turns up) below zero may be a false signal (the shorter EMA has crossed the longer EMA but price is not appreciating). IOW, after a sustained down move in the underlying, if the underlying trades flat, the MA's converge (and cross) and the indicator will reverse direction and head towards zero. so that signal may be a legitimate signal or false signal. You need a reference in the price domain to verify the signal's validity. A turn upward above zero must be a legitimate signal.

FWIW, Colby and Meyers tested many indicators in their 1988 book. For the standard MACD, they tested two 10 year periods of data and found that the MACD significanyly underperformed a basic simple moving average crossover system. I doubt that much has changed since (g). Yes, there are times when various indicators perform well there are others when they perform miserably.

Long story short? All technical analysis indicators are a reflection of past price movement. None predict anything. If you guess the periodicity of the market and the market cooperates, the indicator performs well. If not, you lose.

 

[Turveyd]

Bollinger Bands imho are your best bet, gives you direction and current range based on recent performance, I'm doing nicely via them, macd will give no idea of range.