Hello, I have been looking for trading strategy involving EMA cross with MACD as a confirmation. I see alot on the internet. Basically, buy when 2 EMAs cross and MACD above 0. Opposite for sell. Can someone please explain (with a visual example) with an example how the MACD confirms an EMA cross? Does this mean the MACD above 0 is delayed after the EMA cross.? Thank you
While EMA is a "1st derivative of price", MACD is a "2nd derivative of price" (moving average of a moving average). To get any kind of signal/cross from MACD, there needs to be a "bigger move". Unfortunately, such bigger move is no assurance the move will continue. And even when it works as envisioned, other things signal "earlier in the move". I am not a fan of MACD at all. Traders should be able to get their trading signal "sooner" than a MACD cross.
MACD is based on EMAs, and both are derivative of price. So by default no big advantage or new information, rather than just looking at price. There's ideas to be had here: https://elitetrader.com/et/threads/simple-profitable-method.76297/
Issue is not "both are price derivatives" and therefore should be "considered equally"... rather that MACD is a "later to the party" indicator because it's a 2nd derivative of price. If asked for my opinion about MACD... I'd recommend to ignore completely.
Yes MACD is a derivative of moving averages which are derivatives of price. I use a double stochastic to confirm a reversal but in a time frame higher than the one experiencing the cross. Confirmation in the same time frame is likely to cause a lot of whipsaw. It might work for a scalping strategy but that's a tough way to go.
What you're looking for is a confirmation that price will continue to rise (it's already risen somewhat or else the MAs would not have crossed). Indicators will not do that for you. Look for something else in the chart that will suggest more buying interest than selling interest.