Here’s another example.

Figure 3

The MACD on figure 3 crossed to the upside along with prices breaking out in early December, but Stochastics lines had crossed earlier. Waiting for the second cross to occur (blue arrow on bottom of chart), the right moment presents itself for an entry. With the lines already above 80% on the reading, this pop is confirmed with a breakout from the high from October, a significant event. With the MACD firmly moving higher, the timing couldn’t have been better.

Figure 4. Using MACD and Bollinger Bands to time entry with the trend.

The last chart illustrates the use of MACD (trend indicator) and Bollinger Bands (oscillator) to find the setup to trade. MACD lines crossed in late November but Bollinger Bands touching the top line. For a long entry, this price location is not ideal. The rule for Bollinger Bands (BB) is to fade the extremes, a counter-trend indicator. The rule is to buy or cover short when the prices touch the bottom line and sell or sell short when prices touch the top line. Since the purpose of this strategy is to trade with the trend, we have to wait until the prices move down to touch the bottom BB line. Finally, by mid-December, price finally touched and beginning reverse to the upside, an entry is immediately taken.

It must be remembered that these strategies work only when discipline is applied religiously. There is no room for errors and misinterpretation, for example, a belief that a trade is there when in fact it isn’t. Sometimes a strategy is simple but traders have a tendency to make it more complicated than it really is. Only when the criteria are met the trader is notified of the setup. A scan can take away a large degree of discretionary interpretation. This will avoid a factor why many traders fail thinking it’s the strategy but in fact it’s the traders that failed.