How to Trade Using MACD

MACD – Moving Average Convergence Divergence

MACD Signal Line Calculation.

The moving average convergence divergence indicator – better known as MACD (pronounced “mac-dee”) – is one of the most popular tools in all of technical analysis and has been in use since the late s. The MACD is . This Forex Trading tutorial looks at one of the most common trading strategies available: the Simple Moving Average and the MACD indicator.

BREAKING DOWN 'Moving Average Convergence Divergence - MACD'

When MACD crosses up and over the signal, the histogram will climb above the ‘0’ line - and when MACD crosses down and below the signal, the histogram will drop below the ‘0’ line. Created by James Stanley. MACD Inputs. The default MACD inputs of 12, 26, and 9 are the more common settings for the indicator.

Right-click the MACD - you will have to be exactly on the line of the indicator to get the options menu. Choose MACD-2 13,17,9 - the numbers 13, 17 and 9 refer to the number of time periods the indicator bases its calculations on and you can change these depending on your preference.

Why Get month Premium Membership for free. How to log into MetaTrader 4 a minute. Opening a chart in MetaTrader 4 a minute. How to modify a chart in MetaTrader 4 2 minutes. How to set up a template and pivot points a minute. Manage your trades in MetaTrader 4 a minute. How to add a template to MetaTrader 4 a minute.

Save a picture of your trade in MetaTrader 4 a minute. Using one-click pending orders with MetaTrader 4 a minute. Drag and drop orders a minute. Setting up fractals in MetaTrader 4 a minute. How to set up channels in MetaTrader 4 a minute. Setting up Moving Averages in MetaTrader 4 a minute. Setting up Bollinger bands in MetaTrader 4 a minute.

Setting up the Stochastic Oscillator in MetaTrader 4 a minute. How to set up additional instruments in MetaTrader 4 a minute. If you look at our original chart, you can see that, as the two moving averages separate, the histogram gets bigger. As the moving averages get closer to each other, the histogram gets smaller.

And that, my friend, is how you get the name, M oving A verage C onvergence D ivergence! Whew, we need to crack our knuckles after that one!

When a new trend occurs, the fast line will react first and eventually cross the slower line. From the chart above, you can see that the fast line crossed under the slow line and correctly identified a new downtrend. Notice that when the lines crossed, the histogram temporarily disappears.

As the downtrend begins and the fast line diverges away from the slow line, the histogram gets bigger, which is good indication of a strong trend. This suggested that the brief downtrend would eventually reverse. There is one drawback to MACD. Naturally, moving averages tend to lag behind price.

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On this case, when this candle starts to appear to the down side, you can see that we have divergence from the two lines and we have momentum building to the down side, because the histogram is building below zero.

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