Trend breakout forex
What this histogram does is actually show the difference between the slow and fast MACD line. When the histogram gets bigger, it means momentum is getting stronger. When the histogram gets smaller, it means momentum is getting weaker. So how can we use this when trying to spot a trend reversal? Glad you asked! Remember that trading signal we talked about earlier called divergences and how it occurs when the price and indicators move in the opposite direction? Since MACD shows us momentum. However, if MACD begins to decrease even when the trend is continuing, you can deduce that momentum is decreasing and this trend could be close to an end.
You can see from the picture that as the price was moving higher, MACD was getting smaller. This meant that even as the price was still trending, momentum was beginning to fade out. From this information, we can conclude that a trend reversal is highly likely.
There are the lows that you use to draw upward trendline. So you need to connect at least two higher swing lows and you would have an upward trendline. When you see price breaks a trendline, it is usually an early signal that a trend may be changing. So will wait for the candlestick close below or above a trendline before you place your order.
For the buying and selling rules below, refer to this chart. Next thing you do is to place a pending buy stop order above the high of the candlestick that intersected the trendline and closed above it.
Jusho