BB MACD indicator
Creating your own trading strategy is in many ways reminiscent of playing with a construction set, where each
cube has its own task, and their common whole creates a complete structure.
By creating a strategy, you, as a trader, combine all the positive qualities of certain indicators and at the same time cover the negative ones, which in general will help you achieve your goals.
However, the vast majority of beginners begin, to put it mildly, to exaggerate the importance of having various indicators in the strategy, so we can see charts cluttered with dozens of necessary and unnecessary indicators.
This is especially noticeable when a trader tries to create a trading strategy from standard indicators, where, as a rule, 1 indicator is responsible for one direction.
The BB MACD indicator is a technical analysis tool that combines the properties of two of the most popular indicators among the trading community, namely MACD and Bollinger Bands.
When you first look at this indicator, you won’t even be able to tell that it contains MACD, but if you combine these two instruments on the chart and look at their signals, in most cases they will be identical and appear simultaneously.
The tool can be used on any currency pair and any time frame, but due to the obvious trend component of the indicator, the best time frames for BB MACD are thirty-minute and hourly charts.
Setting BB MACD
BB MACD is a custom indicator that you will never find by default in any trading platform. Therefore, in order to use it, you must first download the file itself at the end of the article and install it in the MT4 trading platform. To do this, enter the open platform in the file menu and launch the data directory.
By entering this directory, you get access to the system folders of the platform, so we drop our pre-downloaded indicator into the indicators folder.
For the tool to appear in the list of custom indicators, simply restart the terminal or update the files in the “navigator” panel. Actually, after installation, drag the instrument onto the chart.
Indicator signals
As already mentioned, BB MACD has absorbed the important features of two indicators, namely MACD and Bollinger Bands. From Bollinger Bands, the indicator took the feature of measuring market volatility and trend strength. To do this, the indicator contains two lines of red and blue, which create a kind of channel.
If you are observing a wide channel, you have a strong trend with high volatility. If the channel from the indicator lines has narrowed greatly, the trend has entered a sluggish current stage and has a sideways character.
However, you must clearly understand that any compression of the channel leads to a strong surge, as happens in the case of a spring if you try to compress it as much as possible. Therefore, a narrow channel should warn you of an imminent strong surge, and not of a weak trend.
The second type of signal occurs according to the principle of using MACD, namely the points crossing the 0.00 level. It is considered that if the points are above the signal line, the global trend is upward. If the points are below the signal line, the global trend is downward.
Actually, when the global trend changes, a position is entered, namely, if a point appears above level 0, we buy, and if a point appears below level 0, we sell. See an example below:
The third type of signal is based on the points of the indicator itself. Every trader knows that in addition to the global trend, there is a so-called micro trend in the market, which, in the totality of its movements, gives the overall picture.
Actually, if the global trend lasts for a long time, then the micro trend is more short-term. The BB MACD indicator displays a short-term trend using the color of the dots, and if the dot is green, the trend is upward, if pink, the trend is downward.
When the color of the dot changes, a buy or sell signal occurs. Example below:
In conclusion, it is worth noting that the BB MACD displays the micro trend more clearly than the standard MACD and can easily replace the standard indicator. However, if we talk about the properties of the channel, then its functionality is not sufficient to abandon Bollinger Bands as can be done with MACD.
Download the BB MACD indicator