Trigger Line

What Is a Trigger Line?

A trigger line is a moving average plotted on the moving average convergence divergence (MACD) indicator that is utilized to produce 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. Albeit the nine-period EMA is the trigger line's default setting, traders can change the EMA's length to suit their trading strategy.

How Is the Trigger Line Calculated?

The trigger line is a moving average of the MACD (or other indicator) calculation.

Work out an EMA of the last 'n' values of the indicator to make the trigger line. Nine is an ordinarily utilized 'n' value.

What Does the Trigger Line Tell You?

The trigger line gives technical knowledge on when to go long or short. Traders search for sections and leaves when the MACD line crosses the trigger line.

At the point when the MACD crosses over the trigger line, this could be utilized as a buy signal. On the other hand, when the MACD falls below the trigger line, this could be utilized as a sell or short signal.

Such trade signals are generally not utilized in separation, yet rather another filter is applied to the trade signals, like the bearing of the overall trend. For instance, in the event that the price is making over high swing highs and higher swing lows — an uptrend — then, at that point, buy signals might be utilized to enter a trade. Sell signals would be utilized to close the trade.

Since the MACD might cross the trigger a couple of times before taking a substantial action, getting quality trade signals is more earnestly in reality than in theory. The signals might create profits when the price of a security is in a strong trend, yet when the price isn't trending strongly, signals ought to be treated with alert.

One of the benefits of indicators, and the trigger line, is that they can settle on trading choices systematic. Traders can remain in a position until the MACD crosses the trigger line the other way. For instance, in the event that a long position is taken when the MACD crosses over the trigger line, the trader can remain in the trade until the MACD crosses below the trigger line. Entering and leaving the market on signals produced by the trigger line stops traders from re-thinking themselves and pursuing discretionary choices.

As indicated, however, different filters are suggested, as taking all MACD trigger line trade signals could bring about critical commissions and losses.

Instances of How to Use the Trigger Line

The accompanying chart shows a strong uptrend in Apple Inc. (AAPL). In light of the overall uptrend, buy signals could be utilized to open long positions, while the sell signals would close the position.

Over the 13-month period, the MACD trigger line signaled different long trade opportunities. Several of these were productive.

The indicator won't function admirably in all conditions. Thusly, whenever the situation allows, search for strong trends and then utilize the trigger line for trade signals.

The Difference Between the Trigger Line (MACD) and Signal Line (Stochastic)

The terms are frequently utilized reciprocally. Trigger lines or signal lines are moving averages of the underlying indicator. The stochastic oscillator has a signal line like the MACD trigger line. The stochastic signal line (D) is a three-period moving average of the stochastic (K).

Limitations of Using the Trigger Line

In choppy markets, the trigger line can as often as possible crisscross the MACD and produce many buy and sell signals. To try not to get whipsawed out of positions, traders ought to affirm a trigger line cross with other technical indicators or trend analysis.

The MACD is a lagging indicator. Adding a moving average to it can make more lag between when price really bottoms or tops and the indicator has a crossover. Sometimes buy signals are produced once the price has previously risen substantially, or sell signals are created after the price has proactively fallen essentially.

Highlights

• The trigger line can be utilized used to produce trade signals when the MACD crosses above it or below it.
• Trade signals are not dependable without confirmation or filtering from different forms of technical analysis or indicators.
• The trigger line is a nine-period EMA of the MACD indicator.