I hope that you guys like the forex macd divergence strategy that I have shared with you some times back. In this post today, I shall show you one trading example of this strategy so that you can have a better picture of how to use it.
From the example below, it is taken off the EURUSD hourly chart and this means that each candle represent an hour of action.
You can see that there is a positive macd divergence forming on this pair as the price makes a lower low while the macd makes a higher low.
As soon as the formation of the positive divergence is formed, I will enter a trade. I will then place the stop loss at the most recent low which is indicated by the blue horizontal line.
When I enter a trade, I will usually enter 2 separate lots. One lot will exit when the price hits the amount of pips equivalent to the amount of stop loss.
Once the first target is triggered, I will then move my stop loss for the 2nd lot to breakeven. This is what I call trade management, this is to ensure that I will be making profit even when the price reverses against me.
The 2nd lot will be exited at twice the amount of stop loss set. With such arrangement, you will be trading with a risk reward ratio of 1:1.5.
From the picture, you can see that the price actually manage to hit the 2nd target profit which give me a profitable trade as a whole.