MA Convergence/Divergence Technical Analysis and MACD Signals

Developed by Gerald Appel,

The Moving Average Convergence/Divergence is one of the simplest, reliable, & most often used indicators.

It's a momentum oscillator & also a trend-following trading indicator.

Construction

The construction of this indicator calculates the difference between 2 moving averages and 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.

FastLine = difference between 12 and 26 exponential MAs
Signal-line = moving average of this difference of 9-periods

XAUUSD MT4 Indicator MACD

Technical Analysis & How to Generate Signals

MACD is often used as a trend-following indicator & works most effectively when interpreting trending market movements. The 3 common methods of using MACD to generate trading signals are:

XAUUSD Cross Overs Signals:

FastLine/Signal Line Cross over:

A buy signal gets generated when Fast-line crosses above Signal Line
A sell signal gets generated when the FastLine crosses below the Signal-line.

However, in a strong trending market this signal gives a lot of fake outs, the best cross over to use would thus be the Zero Line Cross over Signal that is less prone to fake outs.

Zero Line Crossover Signals:

When the Fast-line crosses above the zero center line a buy signal gets generated.
when the FastLine crosses below the zero center-line a sell signal gets generated.

Divergence XAUUSD:

Looking for divergences between the MACD and price can prove very effective in identifying potential market reversal &/or trend continuation levels in price movement. There two types of divergences:

Classic Divergence Trading Setup Signals
Hidden Divergence Trading Setup Signals

Over-bought/Oversold Conditions:

MACD is also used to spot potential overbought-over-sold conditions in price action movements.

These levels are generated if the shorter MACD Lines separate dramatically from the median, this is an indication that price action is over-extending & it will soon return to more realistic levels.

MACD and Moving Average XAUUSD Cross Over Gold System

This technical indicator can be combined with others to form atrade system. A good combination with the Moving Average cross-over trading system. A signal gets generated when both give a signal in the same direction.

XAUUSD MetaTrader 4 Technical Indicator MACD - MACD Indicator

Technical Analysis in XAUUSD

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