Macd baby pips school

I was going over the MACD instructions in Babypips school, and where the Fast line crosses over the red line, it says it is trending down, but it looks to me to be just ranging. Then when there is another crossover it says the trend goes up, which is correct for the 2nd crossover. Maybe it’s just my eyes! Or maybe I need glasses. If it is trending down it is a small down trend, barely noticeable.

It looks like you just have or are just about to realise the uselessness of the good old beautiful MACD, just like a McD, nice to taste but useless for your waistline!

I take it your not a fan of MACD.

It’s not that, it’s just the fact that it’s totally useless, like nearly all indicators.

Its mostly like advantage. Its such a fact to show anything.

the final word is the price word, everything else will follow it.
the MACD crossover just prove that the price has made a change of the direction but no one knows how long this change will continue.
you have so many guiding tools in forex, and if one only one tool seems to be true 100% all the time, you should see all forex traders have their own spaceships on their own planets.

i think a regular guy may need few years of learning and practice to master trading.

best wishes.

The final point regarding indicator skeptics is that they SIMPLY do not have the head for them. The mathematicians who create indicators know what they are doing and know what they meant to measure when they created them. It’s ok for people to overlook them but its BOGUS to try and tell people something you do not understand is useless - in fact it’s downright stupid :slight_smile:

If a hedge fund can open 100 lots on a 50 MA crossover on the H4 timeframe and
make £100,000 in 10 minutes I would say the true state of affairs is crystal clear.

QUANT FUNDS RULE, and everything they do is based on statistical indicators. If it goes above your head skip it - If you mean business in this forex game, stop listening to people who have no clue or who have entrenched biases and do your own homework.

There are many ways to compile trade set ups. Find out what works for you.

If you don’t understand proven approaches say nothing. Common sense should prevail above all else.

New traders should not be misdirected. All roads lead to Rome after all.

MACD is the difference between the 26MA and the 12MA. Why is that significant?
The difference is smoothed with a 9MA to create a signal line, why is that significant?

This is a statistical studies question - nothing to do with trading.

If you don’t understand what is being measured how can you change the settings to match your trading style?

If you don’t understand what is being measured then you wont see why you must observe MACD over multiple timeframes, not just one (For a start you cannot confirm a trend with MACD in the same timeframe you are opening trades in, ADX is designed for that and even then needs for example confirmation in the 15 if you are trading 5, if you trade higher you can use it in your opening frame DEPENDING on the premise and approach in your overall system.)

Even more poignant then would be an inability to modify or enhance the basic indicator to observe statistics more meaningful to your trading style and objectives.

Trust me - follow your own curiosities to find solutions and don’t shirk hard work allowing you to enhance your overall understanding.

[QUOTE=modernmystery;309192]The final point regarding indicator skeptics is that they SIMPLY do not have the head for them. The mathematicians who create indicators know what they are doing and know what they meant to measure when they created them. It’s ok for people to overlook them but its BOGUS to try and tell people something you do not understand is useless - in fact it’s downright stupid :slight_smile: I myself understand that indicators are created from people who have a high degree of math skills. I am sure they are there for a reason. When you hear about a pro from this site and a member saying that indicators are useless, that is an eye opener. It tells me that not all Traders need indicators. My main point is a reference to the instruction in Baby Pips school on the first page of the MACD tutorial, that explains the first cross over of the blue line over the red line, where it says there is a clearly a bearish trend. Or reversal, If you look at the image it looks to me like a bullish or ranging trend. Barely a trend at all and definitely not a bearish trend. Check it out, and correct me if I am wrong.

Apologies if nothing below makes sense - been awake 31 hours but still decided to answer :stuck_out_tongue:


Definition of ‘Trend’ - The general direction of a market or of the price of an asset. Trends can vary in length from short, to intermediate, to long term. If you can identify a trend, it can be highly profitable, because you will be able to trade with the trend.

When most traders think trend they are not talking about price anymore but the general market or average price tending towards higher highs or lower lows when observed over what ever period of time interests them. We zoom out from the individual ticks or bars and employ visual averaging to generalise about the general direction of the market despite explicit price movements over the averaging period.

“up trend”

Price trending would be any observable persistent run in the same direction of price even if that run took us from 1.34120 to 1.34129 before reversing (a 0 pips move to no where but also a significant 9 point move or up trend). MACD is using a list of 12 and 26 close bar prices as a BASIS to deduce a ‘trend’ (a sustained movement in one direction). Not a market trend like above but a numerical trend.

“six trends” (give or take)

What is a market trend?
How long do you have to watch a digital stock price ticker move up or down (no charts) before you decide that the price is trending one way or the other? Will you read it every second or every one minute? Or every 1 hour or once a day? how do you know when the trend has legs?
MACD helps to solve these by producing two numbers (lines if plotted on a chart) we can compare for > and < but also by how much greater and how much lesser to determine how drawn out our price trend is and how far it could have to go before flipping (crossover aims to detect looming price trend flip when both numbers are first = then switch from > to < or vice versa ).

The part you play is deciding what time frame from which to grab your 12 and 26 closed bars.

12 5M bars is like standing in front of that stock ticker for one hour, observing the price every 5 minutes and using that info to determine trend somehow.

12 M30 is like standing in front of the stock ticker for 6 hours and observing the price every 30 minutes.

Where you put the MACD if it isnt on a tick feed aims to give u a broader view of price trending based on the every 5m or every 30m price close bar samples you let it work on collecting a 12 and 26 ema set to produce the main MACD line and then apply the 9 sma for the signal.

Some think higher highs every 30 minutes is an up trend, if so you can apply MACD there.

Some think higher highs every 4 hours is an up trend, fair enough,

Some think higher highs every 1 hour PLUS every 4 hours is an uptrend.

Is a MACD trend the same as a price action trend line drawn from highest high down to last high touching most highs in between???

You draw that line on a 15M chart over 20 bars, that’s 5 hours of prices movement up and down (trending multiple times) but its also capturing in the line one general trend and direction. MACD is dealing with those smaller trends until you movement it up to higher timeframes where it will eventually correspond with the general trend line you drew.

Hope this explains why the babypips lessons talks of bearish, it’s simply cos the price is going down and not saying the best fit averaging type of trend line traders use is going down.

Modernmystery- Some good explanations. Worth looking into. I kind of thought myself along your path. I haven’t really gotten into it enough to come to any solid conclusions, since for one I don’t understand the Indicators enough at this point. But, I will go over your explanations and receive some awakening info. Thanks!

I hate maths and struggling with abstract concepts. But I have done over 400 chart+indicator+indicator settings+multiple timeframes observations to get indicators working for me. If you can solve the basic problem of When Do I Enter? and When Do I Exit? with them that’s great, some traders still use squared paper, a calculator and pencil some use Excel - what ever works.