Post of the Day: Charts First, Indicators Second

[B]Student’s Question:[/B]

When using MACD, should I pay more attention to what the MACD indicator is showing or to what the chart is showing. Like when the MACD cross shows a sell should I sell and then when it shows a buy should I buy…just follow those signals? Confused.


[B]Power Course Instructor’s Response:[/B]

Good question…

Many traders become overly focused on the indicator at the expense of what the chart is telling them. The chart graphically shows price action and price is indicator #1, our prime indicator.

As traders we should first focus on what the chart is showing us…is the pair trending up or down? If the trend is down (as it is on the chart below) we should pay attention to the chart and only take trades in that direction as those will be the higher probability trades.

When the above determination is made, we THEN turn to the indicator as a tool time our entry in that direction.

So, trade the chart first and the indicator second.