Moving Average Convergence/Divergence CFD Technical Analysis & MACD CFD Signals
Created by Gerald Appel,
The Moving Average Convergence/Divergence is one of the simplest, reliable, and most oftenly used indicators.
It is a momentum oscillator & also a trend-following indicator.
Construction
The construction of this indicator calculates the difference between 2 moving averages & then plots that as "Fast" line: the second "Signal" line is then calculated from the resulting "Fast" line and then drawn on the same panel window as "Fast" line.
- "Fast" line - Blue Line
- "Signal" line– Red Line
The "standard" MACD values for "Fast" line is a 12-period exponential moving average & a 26-period exponential moving average & a 9-period exponential moving applied to the fast line, this plots "Signal" line.
- Fast-line = difference between 12 & 26 exponential moving averages
- Signal Line = moving average of this difference of 9-periods
CFDs Technical Analysis and Generating CFD Signals
The MACD is oftenly used as a trend-following indicator & works most effectively when interpreting trending market movements. 3 common methods of using MACD to generate signals are:
CFDs Trading Crossovers CFD Trading Signals:
Fast-line/Signal Line Crossover:
- A buy trading signal is generated when Fast-line crosses above Signal Line
- A sell trading signal is generated when the FastLine crosses below Signal-line.
However, in a strong trending market this cfd signal gives a lot of whipsaws, the best cross over to use would thus be the Zero Line Crossover Signal that is less prone to whipsaws.
Zero Line Crossover Trading Signals:
- When the FastLine crosses above the zero center line a buy cfd trade signal is generated.
- when the FastLine crosses below the zero center-line a sell cfd trade signal is generated.
Divergence CFD:
Looking for divergences between the MACD and cfd price can prove to be very effective in spotting the potential reversal &/or trend continuation points in cfd price movement. There 2 types of divergences:
- Classic Divergence Signals
- Hidden Divergence Trading Signals
Overbought/Oversold Conditions:
MACD indicator is also used to spot potential overbought-oversold conditions in cfd price action movements.
These levels are generated if the shorter MACD Lines separate dramatically from the median, this is an indication that cfd price action is over-extending & it will soon return to more realistic levels.
MACD & Moving Average CFDs Trading Crossover CFD Trading System
This cfds technical indicator can be combined with others to form a cfds system. A good combination with the Moving Average crossover system. A trading signal is generated when both give a signal in the same direction.
Technical Analysis in CFDs Trading
