Before discussing and learn how to use the MACD indicator, please let us know what the heck the MACD it. MACD is an abbreviation of M is the Moving, A is Average C is the Convergence and D is Divergence. This indicator is used to identify the presence of formation of new trends, whether it be bullish or bearish. While the formation of a trend we can identify using this indicator, then this indicator could be a priority to learn and use. Because it can make us earn much profit.
The MACD Indicator
When using the MACD Indicator, we will usually see three numbers that are used for setting it up.
- The first is the number of periods used to calculate the moving average.
- Second is the number of periods used in the slow moving average.
- And the third is the number of bars is used to calculate the moving average of the difference between the average move faster and slower.
For example, if you see “12, 26, 9,” as the MACD parameter (usually the default setting for most chart), this is how you will interpret it:
- The number 12 represented the previous 12 bars of fast moving average
- The figure represents 26 of the previous 26 bars of slow moving average
- Figure 9 represents the 9 bar before the difference between two moving averages.
Well, now we’ve found out what are known as indicator MACD. Now we’ll see what we can do with the MACD indicator.
Learn how to use the MACD indicator
There are 4 signal MACD which we will explore in this article and explain step by step how to use the MACD indicator to determine the position in forex trading.
1. MACD Crossover
Because there are two moving averages with the “speed” of a different, faster will clearly be more quickly react to price movements than slower. When a new trend going on, the lines are quick to react first and eventually pass more slowly. This is called a “Crossover”, and a fast moving average starts “crossed” or away from the lines of slow moving average, often indicates that a new trend has developed. Since the MACD is based on moving average, is ideal for analyzing price momentum, finding entries follow the trend and then close a position when a trend has begun to saturate. MACD crossovers included in how to use the MACD indicator is most readily applicable. Because intersecting (crossover) between two Moving averages are very easy to find.
2. MA MACD Line cuts the 0 (zero)
The line MA is a red line MACD is based on 12 and 26 moving average. We can also see that our analysis focused on the two moving average on graphs and when to Moving Average MACD line began cutting 0. As I said before, the MACD line is similar to the system moving average crossover and ma cut a line of 0 means show that the MACD trend already unconfirmed.
As we know from the article moving average crosses, 2 MA indicates a change in a trend and often presaged the creation of new trends. So, every time the MACD Line crosses 0, it shows that the momentum is changing and a potentially new trend is being established.
3. Trendline Breakout Breakout MACD Line + 0
The image below shows another classic example of how to analyze using the MACD to predict prices. The timeline of the trend line is penetrated. When moving averages to zero over the line to the downside, a new downtrend begins. in addition, the candle is also penetrating the line of the trend line. While this is a good moment to do sell open positions. Due to the breakout trends downward and the macd crosses the zero line towards the negative area is an indication of a pretty strong downtrend.
4. The MACD Divergence
MACD divergence is another way to analyze the price and find the position of a trade. You can see in the picture below how prices move higher and very slowly over a long period of time. In addition, at the same time, the MACD moving shows lower figures. This means that there is no purchasing power again. Then, suddenly, the price broke below the two fast-moving average MACD line and also crosses under 0 gives a short entry to do the sell entries. As long as the MACD is on the numbers below 0 and it allows us to sell only.
An indicator is a tool of the great trade that offers objective and easy to interpret the information. In the case of the MACD indicator is ideal when it comes to analyzing the momentum and also find new trends. Overall, like most indicators, we might just find a wrong analysis when viewing a graph using the MACD indicator movement. But please be aware that by learn how to use the MACD indicator. It’s likely to win the competition in the currency market is very big.