What Is a Trigger Line?

A trigger line is a moving average plotted on the moving average convergence divergence (MACD) indicator that i𓃲s used to generate buy and sell signals for a security. The trigger line, or signal line, is a nine-period exponential moving average (EMA) of the MACD indicator line. Although the nine-period EMA is the tri🤡gger line’s default setting, traders can adjust the EMA’s length to suit their trading strategy.

What Does the Trigger Line Tell You?

The trigger line is a moving average of the MACD (or other indicator) calculation. The trigger line provides technical insight on when to go 澳洲幸运5官方开奖结果体彩网:long or short. Traders look for entries and exits when ♕;the MACD line crosses the trigger line.

When the MACD crosses above꧅ the trigger line, this could be used as a buy signal. Conversely, when the MACD falls below the trigger line, this could be u𓂃sed as a sell or short signal.

Such trade signals are usually not used in isolation, but rather another filter is applied to the trade signals, such as the direction of the overall trend. For example, if the price is making over high swing highs and higher swing lo🐠ws—an uptrend—then buy signals✱ may be used to enter a trade. Sell signals would be used to close the trade.

Since the MACD may cross the trigger a few times before making a substantial mo🐼ve, getting quality trade signals is harder in reality than in theory. The signals may produce profits when the price of a security is in a strong trend, but when the price is not trending strongly, signals should be treated with caution.

Benefits of the Trigger Line

One of the benefits of indicators, and the trigger line, is that they can make trading decisions 澳洲幸运5官方开奖结果体彩网:systematic. Traders can remain in a position until the ꦬMACD crosses the trigger line in the oppo💦site direction.

For example, if a long position is taken when the MACD crosses above the trigger line, the trader can remain in the trade until the MACD cross🐎es below the trigger line. Entering and exiting the market on signals generated by the trigger line stops traders from second-guessing themselves and making discretionary decisions.

As in🐈dicated, though, other filters are recommended, as t🍃aking all MACD trigger line trade signals could result in significant commissions and losses.

Examples of How to Use the Trigger Line

The following chart shows a strong uptrend in a stock. Based on t𒊎he overall uptrend, buy signals could be used to open long positions, while the sell signals would close the position.

Over the 13-month period, the MACD trigg𝐆er line signaled multiple long trade opportunities. Several of these were profitable.

The indicator won't work so well in all conditions. Therefore, whenever possible, look for strong trends and then use the trigger line for trade signals.

The Difference ♍Between the Trigge෴r Line (MACD) and Signal Line (Stochastic)

The terms are often used interchangeably. Trigger lines or signal lines are moving averages of the underlying indicator. The 澳洲幸运5官方开奖结果体彩网:stochastic oscillator has a signal line similar to the MACD trigger line.💞 The stochastic signal line (D) is a three-period moving average of the stochastic (Kಌ).

Limitations of the Trigger Line

In choppy markets, the trigger line can frequently crisscross the MACD and generate many buy and sell signals. To avoid getting 澳洲幸运5官方开奖结果体彩网:whipsawed out of positions,🐎 traders should confirm a trigger line cross with other꧋ technical indicators or trend analysis.

The MACD is a 澳洲幸运5官方开奖结果体彩网:lagging indicator. Adding a moving average to it can create more lag between when the price actually bottoms or tops and the indicator has a crossover. Sometimes buy signals are generated once the price h𒉰as already risen substantially, or sell signals a𝔍re generated after the price has already fallen significantly.

The Bottom Line

The trigger line helps traders make decisions about when to go long or short, and allows for this process to be systematic. The trigger line, however, doesn't work best in all scenarios, such as in choppy markets, so additional indicators are recommended.