Hello, my friend, and welcome to this tutorial on Bollinger Bands of the MACD Indicator, Part 2. In this post, we will discuss how to apply Bollinger Bands to the MACD indicators for trade signals that are “invisible” to other traders. Enjoy!
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Bollinger Bands of the MACD Indicator, Part 2 – Video
Hey, welcome to the sequel on how to utilize signal indicators. This is Part 2 of the series. In Part 1, we discussed setting up the indicators, and if you haven’t seen that yet, feel free to check it out; I’ll provide a link below. Thanks to everyone who left comments on using these indicators on different charting systems, especially on NinjaTrader, which I personally use. Your generosity in helping fellow traders is much appreciated.
Now, let’s move on to more detailed information. Due to the questions I received, there will be at least three parts in this series. At Top Dog Trading, we don’t just give you setups; we focus on providing the reasoning, logic, and knowledge behind why something works and why it will continue to work. I want to share some of that knowledge today based on the questions I’ve received.
In this video, I’m specifically focusing on the MACD (Moving Average Convergence Divergence) indicator. I’m plotting the MACD line without the signal line, Bollinger Bands, or histogram. I want to keep it simple to avoid information overload, which can happen when using indicator overlays.
Getting into the Details – Bollinger Bands MACD Indicator
Now, what does the MACD line signify? It represents the difference between the 12-period exponential moving average (EMA) and the 26-period EMA. The nine below is the moving average of that difference. The MACD line crossing zero indicates that the two moving averages are equal. When it goes below zero, it signifies the crossing of the 12 and 26 EMAs.
The green line represents the 12 EMA, and the red line represents the 26 EMA. When these lines cross, the MACD line also crosses the zero line. When the MACD line is decreasing, it means the difference between the moving averages is getting larger. Conversely, when it’s increasing, the difference is getting smaller.
It’s essential to understand that the MACD measures the convergence and divergence of moving averages, not the direction of price movement. Just because the MACD line is going up doesn’t necessarily mean the price will go up. The MACD is a mathematical formula, and its lines represent the relationship between moving averages.
Watch Out for Part 3 – Bollinger Bands MACD Indicator
In the next video (Part 3), we’ll go into more details about how to use Bollinger Bands in conjunction with the MACD for trading. I appreciate your questions and engagement. Remember, indicators alone don’t guarantee profits; they are tools to be used in conjunction with other aspects of trading, such as price action, risk management, and a comprehensive trading system.
Feel free to ask any questions or share insights in the comments. If you’re interested, I also offer a complete trade setup called the Rubber Band Trade for free. Check the description for the link. Thanks for watching, and stay tuned for the next video, likely coming out tomorrow.
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