The IMACD is by itself a very powerful custom indicator to use within your FX trading system. This is similar to the bog standard MACD but has some key distinguishing features. As a result it helps a trader identify trend direction and strength, and in this article we look at how to combine the IMACD with another useful indicator known as the Accelerator Oscillator to identify trading opportunities that are ripe for the taking.
Combining The IMACD And The Accelerator Oscillator For Powerful FX Trading
The Beauty Of The IMACD For FX Trading. This tool can be especially poignant when traders want to know how a trend is progressing. The IMACD includes a histogram combined with two lines, all of which gravitate above and below the horizontal zero line. When the histogram on the IMACD flips from negative to positive, it’s an indication to go long. When the histogram flips from positive to negative, this can be a powerful signal to go short – and the market usually does correlate with this, making the IMACD an insightful tool to have on your side.
The actual IMACD signal that delivers a buy or sell signal is when the red line cuts into the horizontal zero line. Should it cross the zero level downwards, this is a SELLING signal. When it soars up, over and beyond the zero line this is a stark BUYING signal.
Remember however that there will always be some irregularities when using the IMACD alone as a trading signal. For example, there may be times when the market is very short lived within the direction of the signal (or it may not materialize at all). This is exactly why we should look into adding additional FX trading indicators to make our trading more reliable. This is why we will add in the Accelerator Oscillator indicator, to help give us a confirmation of the IMACD signal.
A Quick Description Of The Accelerator Oscillator (AC). The Accelerator Oscillator is a good way of knowing how much energy a trend has within it. As the AC pokes its head above the horizontal zero level, it is telling us that there is bullish momentum within the market. The colour code will be green as it begins to display bullish energy, and red as that bullish energy begins to dissipate. Similarly, bearish momentum on the AC will be highlighted by red bars, and our signal to go short would be to wait for the first red bar that appears below the horizontal scale.
The FX Signals We Are Looking For To Go Long & Short
Long Signal. Here we are looking for the IMACD lines to cross up above the horizontal level in conjunction with the Accelerator Oscillator ALSO making its first poke up above the zero level. When both these conditions are met, we can go long on the next FX candlestick. Since we are going long, we should ideally be looking to ensure that the price is not squatted on a resistance level that would prevent significant upside.
Short Signal. When looking to ride gloomily along with the bears, we want to see the IMACD lines cutting down below the horizontal zero level. Ideally, we should also see the Accelerator Oscillator make its first bar below its own horizontal level. Since we are going short, we want to make sure the price is not hovering anywhere near a support level.
Together, the IMACD and the AC make for a useful way to get into new trends at just the right times.