The MACD (moving average convergence divergence) is one of my favourite trading tools or indicators, and might actually be the most powerful of them all. I first started using the MACD in 2015 and have been studying it since, it takes a long time to learn and understand all the parts of it. I wonder if I have learned all the hidden secrets by now, or will there be many more to come.
The MACD is a trend analyzing momentum indicator that indicates the difference between two exponential moving averages. It is calculated by subtracting the 26 period ema from the 12 period ema, this plots the calculation of the MACD line. A 9 period EMA of the MACD called the signal line is then plotted alongside the MACD line which results in the formation of the strong MACD. The default settings of the MACD are 12, 26, 9, slightly faster settings can be achieved by changing the numbers. The MACD indicator is also composed of a histogram which plots the difference between the MACD line and the signal line. When the MACD is higher than the signal line the histogram will be above the zero axis, conversely if the MACD is below the signal line the histogram will be below the zero axis.
There are many ways to use the MACD, 1) the first way to use the MACD is with the signal crosses such as when the MACD line crosses above the signal line. 2) a second way you can use the MACD as an indicator is when the MACD line and or signal line crosses above or below the zero axis, if it is crossing above the zero axis the trend is bullish, oppositely if it is crossing below the zero line the trend is said to be bearish. 3) A third way you can utilize the MACD is by using the histogram, when the histogram inflects from positive to negative this is a bearish signal, when the histogram inflects from negative to positive this is a bullish signal. More so for the example of 3) you can see that on the chart example I have provided below that the histogram is below the previous swing low and has shown a potential oversold value compared to the last or others before, you can compare other previous swing lows by zooming the chart out and making a larger comparison of all the values in the month or year for example, this also applies to 4) with the signal and MACD lines. 4) A fourth way to use the MACD as an indicator is by using the values on the Y axis, these can range to be any number increasing to positive infinity, or decreasing to negative infinity. You can furthermore compare previous high values and low values as an indication of the chart being overbought or oversold, you can use these values both with the MACD line/signal line and with the histogram itself. I suggest adding the MACD indicator to your chart and testing these methods.$EUR/USD
Ilyas Khan Top1 Markets
The MACD is a trend analyzing momentum indicator that indicates the difference between two exponential moving averages. It is calculated by subtracting the 26 period ema from the 12 period ema, this plots the calculation of the MACD line. A 9 period EMA of the MACD called the signal line is then plotted alongside the MACD line which results in the formation of the strong MACD. The default settings of the MACD are 12, 26, 9, slightly faster settings can be achieved by changing the numbers. The MACD indicator is also composed of a histogram which plots the difference between the MACD line and the signal line. When the MACD is higher than the signal line the histogram will be above the zero axis, conversely if the MACD is below the signal line the histogram will be below the zero axis.
There are many ways to use the MACD, 1) the first way to use the MACD is with the signal crosses such as when the MACD line crosses above the signal line. 2) a second way you can use the MACD as an indicator is when the MACD line and or signal line crosses above or below the zero axis, if it is crossing above the zero axis the trend is bullish, oppositely if it is crossing below the zero line the trend is said to be bearish. 3) A third way you can utilize the MACD is by using the histogram, when the histogram inflects from positive to negative this is a bearish signal, when the histogram inflects from negative to positive this is a bullish signal. More so for the example of 3) you can see that on the chart example I have provided below that the histogram is below the previous swing low and has shown a potential oversold value compared to the last or others before, you can compare other previous swing lows by zooming the chart out and making a larger comparison of all the values in the month or year for example, this also applies to 4) with the signal and MACD lines. 4) A fourth way to use the MACD as an indicator is by using the values on the Y axis, these can range to be any number increasing to positive infinity, or decreasing to negative infinity. You can furthermore compare previous high values and low values as an indication of the chart being overbought or oversold, you can use these values both with the MACD line/signal line and with the histogram itself. I suggest adding the MACD indicator to your chart and testing these methods.$EUR/USD
Ilyas Khan Top1 Markets