edited from prior version
For reference, regarding previous posts relating to the 3/10 Macd indicator that I use please see this link.
Also, this link.
I wanted to go back and highlight a little nuance found within this indicator. Linda Raschke refers to the "slow line" of this macd as the "stability of trend" line. With that in mind, lets look at the chart below and see what it tells us.
Notice how the "slow line" crosses above/below zero just prior to a crossover of the 20- & 50-SMA's, tipping you off to where the "trend" may be heading (a 20-SMA above a 50-SMA tells you that the trend is bullish, and when the 20-SMA is below a 50-SMA the "trend" is selling). This is a critical concept so that we can keep in mind whether we're looking to trade in the direction of trend.
So, what happens when the slow line crosses above/below zero but the Moving Averages don't follow behind? This makes a good point in the importance of checking with the higher time frame. In the chart below, a 15-min (left) shows a negative crossing slow line, but the higher time frame (30-min on the right) shows how the strength in trend is still present:We can see that the slow line crosses zero, however, the momentum isn't showing confirmation. For instance, we can see a slow line cross below zero, however, the momentum has a green bias, hinting that the move in price may likely not be a trend correction, merely a correction.
Just another reason why I use this indicator so often. All you need are a few tools in your toolbox that you're deeply familiar with in order to get the job done.
The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at email@example.com
I am always open to questions, comments, or suggestions on how to improve this blog.