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MACD Indicator Oscillator Trading Indicator Technical Analysis Fast Line & Signal Line

MACD indicator is used in various ways to give trading analysis data.

  1. MACD center line crosses indicate bullish or bearish markets: below zero is bearish, above zero is bullish.
  2. MACD Crossovers indicate a buy or sell trade signal.
  3. Oscillations can be used to indicate oversold & overbought regions
  4. Used to look for divergence between price & indicator.

Construction of MACD

The MACD indicator is constructed using two exponential MAs and this indicator plots two lines. The two default exponential moving averages used are 12 and 26. Then a smoothing factor of 9 is also applied when drawing MACD indicator.

Summary of how MACD indicator is drawn

MACD uses 2 EMAs + a smoothing factor (12, 26 Exponential Moving Averages and 9 smoothing periods)

MACD technical indicator only plots two lines - the MACD fast line and the MACD signalline

How Do I Trade XAUUSD with MACD Fast Line and MACD Signal Line? - Best MACD Parameters Gold Trading

MACD Lines - MACD Fast Line & MACD SignalLines Signals

  • The Fast-Line is the difference between the 26 EMA & 12 EMA
  • The Signal Line is the 9 period moving average of the MACD fast line.

Implementation of MACD

MACD indicator implements the MACD line as a continuous line while the signal-line is implemented as a histogram. These two MACD LINES are then used to generate trading signals using the cross-over trading strategy.

There is also the MACD center line which also is known as zero mark & it's a neutral point between buyers & sellers trading the market.

Values above the center-mark are considered bullish signals while those below are bearish trade signals.

The MACD indicator being an oscillator technical indicator, oscillates above & below this center-line.

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