MACD and RSI are two of the most popular indicators for determining entry and exit points. They can be used together as well as separately.
1. Trading using MACD (Moving Average Convergence Divergence)
MACD consists of:
- DIF (blue line) — the difference between 12- and 26-EMA.
- DEA (orange line) — 9-EMA of DIF.
- Histogram — the difference between DIF and DEA.
Strategies
1. Crossing of DIF and DEA
- Buy signal: DIF crosses DEA from below.
- Sell signal: DIF crosses DEA from above.
- Filter: Works better in trends.
2. Divergence
- Bullish divergence: Price makes a new low, while MACD does not → reversal up.
- Bearish divergence: Price makes a new high, while MACD does not → reversal down.
3. Crossing the zero line
- Buy: MACD (histogram) crosses above zero.
- Sell: MACD drops below zero.
2. Trading using RSI (Relative Strength Index)
RSI shows overbought/oversold:
- Oversold (RSI < 30) → possible rise.
- Overbought (RSI > 70) → possible decline.
Strategies
1. Bounce off levels 30/70
- Buy: RSI falls below 30 and starts to rise.
- Sell: RSI rises above 70 and starts to fall.
2. RSI Divergence
- Bullish divergence: Price falls, while RSI rises → reversal up.
- Bearish divergence: Price rises, while RSI falls → reversal down.
3. Level 50 as a filter
- RSI > 50 — uptrend, looking for buys.
- RSI < 50 — downtrend, looking for sales.
3. Combined MACD + RSI Strategy
Rule:
- Buy when:
- MACD gives a buy signal (DIF > DEA).
- RSI above 30 and rising (or showing bullish divergence).
- Sell when:
- MACD gives a sell signal (DIF < DEA).
- RSI below 70 and falling (or showing bearish divergence).
Example:
- MACD: DIF crosses DEA upwards → buy signal.
- RSI: above 30 and rising → confirmation.
- Enter long, stop-loss below local minimum.
4. Risk Management
- Stop-loss:
- For purchases — below the nearest minimum.
- For sales — above the nearest maximum.
- Take profit:
- Fixed (1:2 or 1:3 to stop loss).
- At resistance/support levels.
- Do not trade against the trend!
Conclusion
✅ MACD works better in trends, RSI — in flat markets.
✅ The combination of MACD + RSI provides more accurate signals.
✅ Always use stop-loss and risk management.
Additionally:
- Check signals on higher timeframes (1H, 4H).
- Avoid trading before important news.
- Test the strategy on a demo account before real trading.
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