How do we recognize the existence of a trend?
We have already said that MACD indicators and moving averages are indicators that can detect the existence of a trend.
These indicators detect trends as soon as they are formed, albeit with a slight delay!
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The half-full glass in relation to them is that they are less likely to make mistakes.
How to use MACD to confirm the existence of the trend?
An example of a correct suction signal
In the daily GBP / USD chart above, we have charted 10 EMAs (blue line), 20 EMAs (red line) and MACD.
Around October 15, 10 EMAs crossed the 20 EMAs and formed an ascending intersection or crossover.
Similarly, the MACD has built an upward crossover and given a buy signal.
If you have been in the market ever since and made a purchase, you will enjoy the beautiful upward trend that has followed.
Later, both the moving average and the MACD traded a few signals.
And given the sharp decline that has taken place, if you were selling you would be making good profits.
Oh..your eyes widened! Yeah?
An example of a false suction signal
Now let’s look at another chart to see how these intersections or crossovers can sometimes give the wrong signals.
We like to call them ” fake ” signals .
How to use MACD to confirm the existence of the trend?
On March 15, the MACD formed an uptrend crossover while the moving averages gave no signal.
If you acted on the MACD buy signal, you would have caught a counterfeit item and thrown yourself into trouble.
Similarly, the MACD buy signal at the end of May was not accompanied by any crossovers or intersections in the moving average.
If you made a purchase at the time, you would have somehow prepared yourself for a loss! Because the price dropped a little after that.
Definitely annoying! So make sure that if you use a sucker, be sure to get approval for its signals.
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