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 is a momentum oscillator and also a trend following trading indicator.

Construction

The construction of this technical 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 MetaTrader 4 Indicator MACD

Technical Analysis and How to Generate Trading Signals

MACD is often used as a trend following indicator and works most efficiently when interpreting and analyzing the trending market movements. The 3 common methods of using MACD to generate signals are:

XAUUSD Cross-Overs Signals:

FastLine/Signal Line Cross over:

A buy signal gets derived/generated when Fast-line crosses above Signal Line
A sell signal gets derived/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's less prone to fake outs.

Zero Line Cross-over Signals:

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

Classic Divergence Trading Setup Signals
Hidden Divergence Trading Setup Signals

Over-bought/Oversold Conditions:

MACD is also used to spot potential overbought oversold 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 and it'll 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 derived/generated when both give a signal in the same market direction.

XAUUSD MT4 Technical Indicator MACD - MACD Indicator

Technical Analysis in XAU/USD

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