How to Use Momentum Indicators to Confirm a Trend
We will use Momentum Indicators to confirm the type of trending that is being formed in the forex market and we will also use it to determine BUY or SELL signals as we use the oscillator indicator.
Included in the momentum indicator are MACD and Moving Average. Okay, we just discuss in the following example the chart of price movements of the GBP / USD currency pair.
On the GBP / USD chart for the Daily period above then we put the 10EMA (blue), 20EMA (red) Moving Average and MACD indicators.
Around October 10EMA it crosses over 20EMA which is a Bullish signal (BUY). Likewise, MACD shows a bullish signal (BUY). What should be done with this condition? yes, you open BUY position on the currency pair above!
Then both indicators give a SELL signal and the price movement goes down. If you ride this movement to get a profit then surely you will get it in a very large amount.
Now we go to the next example of crossing that produces the wrong signal ( fakeouts ). Why do we have to know this? Because if we only learn the right thing without knowing what is wrong then we will not be careful and one day if we encounter the wrong signal then we already know what to do!
In the example above we can see that in March the MACD indicator gave a BUY signal but Moving Average has not given a signal (No Signal). And if we open a BUY position we will definitely get a loss.
Then at the end of May MACD gave a BUY signal but Moving Average still did not give a signal (No Signal). And if we open a BUY position we will definitely get a loss.
The thing we need to do is continue to be careful and do not need to force conditions to always open an order position in any situation. Just open a position in conditions that will truly benefit you. This is just a suggestion, everything depends on your decision.