Live Trading Example – Forex MACD Indicator Divergence Trade

Forex MACD Indicator Trade - Live Trading Example

This time I will be showing you how to use the MACD indicator. The trade shows a bullish divergence between the price action and the Forex MACD which was the reason for the long trade I took with the USD/CAD.

Signals for the Forex MACD Trade

  1. The MACD indicator lines were showing increasing bottoms while the bottoms of the price action are still decreasing. This confirmed a bullish divergence on the chart.
  2. The bullish MACD divergence came after a crossover of the Forex MACD lines.
  3. The lines started an increase afterward.
  4. Meanwhile, the price action has approached the upper level of a Falling Wedge chart pattern.
  5. A breakout through the upper level of the wedge occurred, which was the trigger of the long trade.

Stop Loss and Target with the MACD Indicator

I placed a Stop Loss order below the lowest bottom of the Falling Wedge chart pattern. Notice that the SL was on a relative distance from the price action. The reason for this is that I am not aiming to get the Stop hit in case of a losing trade. The idea is to rely on the MACD indicator and the price action rules for closing a winning or a losing trade. The purpose of the Stop Loss is to be there in case of a big volatile price move against my trade.

The target on the chart is not predefined. I entered the trade without having an exact idea for how long I will hold it. Nevertheless, I placed the minimum target suggested by the Wedge.

Live Trading Example

The price reached the minimum target suggested by the Falling Wedge chart pattern. However, I held the trade further since the MACD indicator was showing a price increase. Suddenly, the price created a sideways move and a sudden drop that made the two Forex MACD lines to create a bearish crossover.

This is why I immediately exited the trade without even managing to shoot the exact moment of the exit. Bottom line, I collected 16 pips with this trade that equals to 0.11% profit for about 1 hour of trading.

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Damyan Diamandiev
Damyan Diamandiev

Damyan is a fresh MSc International Management from the International University of Monaco. During his bachelor and master programs, Damyan has been working in the area of financial markets as a Market Analyst and Forex Writer. He is the author of thousands of educational and analytical articles for traders. When being in bachelor school, he represented his university in the National Forex Trading Competition for students in Bulgaria and got the first place among 500 other traders. He was awarded a cup and a certificate at an official ceremony in his university.

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