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To enter the market first of all it is necessary to determine the global trend. I considered it in detail in the previous article. But to make a profitable transaction it isn’t enough to open positions following the trend. It is also necessary to choose the correct entry moment. An ideal entry moment is the ending of a retracement against the prevailing trend. But before we determine this moment we must determine when the retracement started. The second stage of any trading strategy is devoted to this.
Stage 2. How to determine the moment of the beginning of a retracement against the prevailing trend
Let’s look again at the daily chart (Figure 1). We can see that the faster average of MACD crosses the slower average from top downward. It indicates possible beginning of a downward retracement.
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Рис. 1. На дневном графике сигнал отката вниз: на MACD быстрая линия пересекла медленную сверху внизFigure 1. A signal of downward retracement on the daily chart: the faster average of MACD crosses the slower average from top downward
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If we look at a shorter time frame, at the 4-hour chart we can make sure that it is true (refer to Figure 2).
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Figure 2. Determining the beginning of a retracement from the prevailing trend: a bull divergence of the MACD lines on the four-hour chart
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A bullish divergence of the MACD lines on the four-hour chart signals that the retracement has really started.
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