MACD Indicator

MACD Indicator

Forty First session of Forex Training

Welcome back to Forex professional training in financial markets.

In this session MACD Indicator will be studied in details.

MACD

MACD, Moving Average Convergence Divergence, consists of three Moving Average indicators with various paces.

MACD helps traders to:

1. Detect trend direction
   1. Bullish trend: When MACD bars are higher than level 0.
   2. Bearish trend: When MACD bars are lower than level 0.

On MT4 platform, trader can insert MACD indicator from the Oscillators option of the Indicator menu.

On MACD window there are 3 fields in which trader can determine the value of each MA.

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MACD will be placed on the bottom chart. Trader can insert a line on level 0 from the Levels tab of MACD properties.

When bars are higher than level 0, market price has an upward direction.

When bars are lower than level 0, market price decreases. Hence, MACD shows direction of the market price.

1. Collect Buy and Sell signals
   1. Bullish signal: When bars are higher than level 0 and cross the signal line towards the top.
   2. Bearish signal: When bars are lower than level 0 and cross the signal line towards the bottom.

For example, there is a spot where red signal line is higher than bars, while either of them are lower than level 0.

Trader could place Sell order since this Sell signal was produced.

There is another point that produced Sell signal again. There is an example of Buy signal.

Although bars had already passed level 0 towards the top, still red signal line did not proceed over level 0.

Thus, trader had to wait until signal line has crossed over level 0 to place a Buy order.

Since MACD consists of Moving Average indicators, MACD is based on trend movement and direction.

There are multiple Buy signals on an upward trend, thus, trader could place a Buy order on some prices.

Understand Convergence and Divergence between a market price and an oscillator, which will be discussed in the next session .

That concludes this session, until next time and another session take care.