MACD Indicator - Moving Average Convergence Divergence - Forex

MACD Indicator

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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.

MACD Indicator - Moving Average Convergence Divergence - SMA , EMA and Periods Properties

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.

MACD Indicator - Buy and Sell Signals - Technical Analysis of Forex Market on MetaTrader MT 4

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.

Linkages & Notices

You can also view the video of this session available on the PFOREX Financial Video tutorials.

You can also find the video of this session on PFOREX YouTube Channel.

PFOREX Assist app provides BEST & FREE trading signals and market analysis. PFOREX Assist is available on App Store (iOS version) & Play Store (Android version).

The PDF file of this session is also available.


PFOREX Educational materials in text and video formats are developed by PFOREX Department of Education to enhance and improve investors’ knowledge and trading skills. Due to high risks and volatile fluctuations in financial markets, traders and investors must develop their trading skills and knowledge. It is strongly recommended to apply Risk and Capital Management when trading in financial market.

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