I-Fund-Trader
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Understanding MACD

NSE:JSWENERGY   JSW ENERGY LTD
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When MACD was Developed , it was developed with two different views

01) What the price is doing in relation to two rated moving average ( EMA ) ideally it is treated for 12 and 26 EMA and MACD line is plotted on the chart

02) It also has 9 Period Simple Moving average of MACD line which shows the mean value of MACD line for the past 9 Period as simple calculations ( Not Exponential)

03) The Histogram represents the derivative information between the MACD and 9 Period SMA of the MACD line and it is represented in Visual bar as Named histogram

04) When you understand the Trend and its up coming structure ( Few call it as Pattern) you have to take note which direction you want to trade

05) Most retail try to trade in Counter trade ( which identified by study data form research centers located various location in the world by data analyst

06) Histogram is visually inform that the difference between MACD line and 9 Period SMA is reducing or Expanding , it also has 0 Line which it is considered as

potential trend change information line ,

What you have to identify that weather the price is moving up or down , how far the Momentum is supporting your trade prospective

weather the value line or trend change line is crossed form -Ve to +VE ?

Weather the 1st Bar of Histogram high is taken out by closing basis ?

Weather the price action( Candlestick pattern ) is supporting the theory you believe is going to occur next move ?

there are different views( Long theory ) you should consider before entering the trade

I am trying to inform few points

here R = Risk to Reward

-1 R = The Amount you are ready to consider as stop loss

0 R = the Peak of the bar is Considered as Your risk amount is at 0 that means you have gained the potential of 1 Risk basis X point the candle stick that produces this Bar should give you Profits ( in case booked on that bar ) 1 Rewards for 1 Basis X point Risk

Average R= This is potentially an Bar in Histogram which peak is same as the previous 0 R peak but the price moves above previous candle high , here your earnings should be potentially 1.5 R of the Originally Risk X basis point

You will find Histogram starts dropping and the Moment it drops to the twice the Size of -1R , that is your best Exit method with +2 R as Reward

We have tested it ,

Please remember this will work only when you the Trend and ongoing Pattern it is making

the same is true for Short selling

One of the safest method for Retail and can comfortably make income for living

Good Luck







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