Hello, my friend, and welcome to this tutorial on Bollinger Bands MACD Indicator. In this post, we will look into how to apply Bollinger Bands to the MACD indicators for trade signals that are “invisible” to other traders – using “Indicators of Indicators” to create an “invisible edge” over other traders. Enjoy!
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Bollinger Bands MACD Indicator – Video
Welcome to this post where we will explore a trading technique that can give you an invisible edge in the market. Having an edge is crucial in trading, and there are various ways to achieve it. In this tutorial, we will focus on using the MACD indicator and Bollinger Bands in a unique way to gain an advantage.
To begin, let’s take a look at the daily chart of the market. While this technique can be applied to different markets and intervals, we will focus on the main concept. Typically, traders use indicators that are related to price action. In this case, we will use the MACD indicator as an example. Feel free to experiment with other indicators if you prefer.
Setting Up the MACD Indicator
First, we will set up the MACD indicator with the regular parameters. You can adjust these parameters based on your preferences, but for this trading method, it is recommended to start with the default settings. We will make the zero lines more prominent by changing the color to crimson and increasing the thickness. Additionally, we will remove the part price markers as they are not essential for this technique.
Next, we will focus on the MACD line itself. We will make it black and adjust the width to make it more visible. To remove the difference lines, you can either make them transparent if your trading platform allows it, or change the plot style to dots and set the smallest size possible. You can also make them the same color as the background of your chart to hide them.
Setting Up the Bollinger Bands Indicator
Now, let’s move on to the unique aspect of this technique. Instead of plotting the Bollinger Bands based on price, we will plot them based on the MACD line. This is called an indicator of an indicator. By doing this, we gain an edge as most traders do not use this approach. To set this up, go to your indicators and select the Bollinger Bands. Adjust the settings according to your preferences, but for this tutorial, we will use a period of 20. Make sure to select “bar close” for the daily chart and set the panel to overlay on the MACD.
To make the Bollinger Bands of the MACD line more visible, you can adjust the color and thickness. It is recommended to make the middle line transparent and choose a color that stands out for the upper and lower bands. Once you have made these adjustments, apply the changes and you will see the Bollinger Bands of the MACD line on your chart.
Getting Into the Details – Bollinger Bands of the MACD Indicator
Now that we have set up the indicators, let’s discuss how to use this technique for trading. It is important to note that this technique alone is not a complete trading methodology. To develop a complete trading strategy, you need to consider risk management, money management, psychology, and price action analysis. However, this technique can provide valuable insights into volatility.
The Bollinger Bands of the MACD line act as a volatility indicator. By setting it to two standard deviations and a 20-period moving average, we can observe the volatility of the MACD line. Pay attention to the position of the MACD line in relation to the zero line. This will help determine whether the MACD line is converging or diverging from the moving averages.
In the next part of this tutorial, we will delve deeper into the trading strategy and discuss how to interpret the indicator of an indicator. It is important to note that the functionality of plotting an indicator of an indicator may vary depending on the trading platform you are using. If you are using a different platform, please share in the comments whether this functionality exists or not.
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