Moving Average Convergence Divergence (MACD)

Discussion in 'Forex Encyclopedia' started by ibm'73, Nov 6, 2017.

  1. ibm'73

    ibm'73 Active Member

    MACD is also one of the most commonly used indicator types.
    MACD is usually used by subtracting 12-EMA from 26-EMA. When the MACD has a positive value, and the MA shortterm is above the MA longterm, this shows upward movement, and vice versa for MACD produces a negative reading value. Most traders also observe the "0 / neutral line", this method is the same as "MA crossover". Where, cross up gives a signal to buy, and cross down gives a signal to sell.


    This example demonstrates the usefulness of MACD which is very basic. "Cross" is also the same as "cross" which is available using MA.


    Since the MACD is a lagging indicator, it should follow the parallel movement. As the above example (1H graph), we can see that the MACD has produced "divergence". Divergence will occur when MACD does not follow market price.

    In the above example, we can see that the market makes the new "low" (1) price, and the (1) dimacd circle also new "low". This happens once again (2), the market has made a new "low", or the market has moved lower than the lower (1), but the MACD does not show lower reading than its last reading. And this happens again (3).
    When this happens, traders know which MACD has produced
    "Divergence". In this situation, traders know that the market price will turn upwards.
    Nia likes this.
  2. Nia

    Nia Member

    Thank you once his information for a very useful article
    I love it
  3. ibm'73

    ibm'73 Active Member

    thank goodness that this article gives a lot of feedback for you before you make a transaction
    Nia likes this.
  4. andengireng

    andengireng Member

    MACD is my first strategy when I know what is Forex.
    In my opinion, there is any weakness and strength of MACD

    Weakness of MACD indicator: MACD is slow in providing signal. Because however, MACD is formed from the average price that has happened before.

    Strength MACD indicator: MACD rarely gives false signals, because the more subtle movements. MACD does not show any signal on oversold or overbought conditions.

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