Power Course Instructor’s Response:
Take a look at the historical chart of the USDCAD
First off, at the time of this chart, the Daily trend on this pair was to the upside.
This our first and primary “filter” in determining a higher probability entry. So we know based on this chart that we would only be looking for opportunities to buy the pair.
Next, we see that price action has broken above resistance. When a candle closes above a resistance level, that is an indication that a continued bullish move may ensue.
We could then check other indicators…the MACD in this instance. When the MACD line is above the zero line (the mid point of the histogram bars) bullish positions are favored. Also, we see that the MACD line (green) has crossed over the Signal line (black) to the upside. Moreover, the angle and the separation between the two lines is increasing…another bullish signal. Lastly, in this instance, we see the histogram bars building in the direction of the overall move…to the upside.
In this trading scenario we have several signals that are confirming the uptrend that we have noted on the chart. However, I would not simply take a long position at this point as I could be entering just prior to a pullback. So, for the higher probability entry, I would wait for the pullback to occur before entering into my long position.
I would accomplish that by going down to a shorter time frame chart, perhaps a 1 hour or a 4 hour, to see the retracement end and the pair begin moving back in the direction of the Daily trend...that would be my "trigger". Once that new move to the upside is confirmed, through MACD in this case, the trade could then be entered.