Moving Average Convergence/Divergence (MACD) MetaTrader 4 Indicator Signals

The MA Convergence/Divergence (MACD) indicator was created by Gerald Appel.

The MA Convergence/Divergence (MACD) is one of the simplest, most reliable, & most commonly used indicators available. The MACD is a momentum MetaTrader 4 Indicator with some trend-following characteristics. The most popular construction of the MACD first calculates the difference between two MAs and plots that as the "Fast" line: A second "Signal" (trigger) line is then calculated from the resulting "Fast" line & plotted in the same frame as the "Fast" line. The "standard" MACD values for the "Fast" line are a 12-period exponential MA and a 26-period exponential MA and a 9-period exponential MA for the "Signal" line.

Explanation

MACD is widely used as a trend-following indicator & tends to work most effectively when measuring wide-swinging market movements. There are three basic techniques for using the MACD to generate signals.

MACD Crossovers:

1. Fast-line/Signal Line Cross-over: A buy signal occurs when the FastLine crosses above Signal-line and a sell signal occurs when the FastLine crosses below the Signal Line.

2. Fast line / Zero-Level Cross-over: When the Fast line crosses above zero a buy signal is given. Alternatively, when the Fast line crosses below zero a sell signal is given.

MACD FX Divergence:

Looking for divergences between the MACD and price can prove to be very effective in spotting the potential market reversal &/or market trend continuation points in price movement. There are several types of divergences:

Classic Divergence (Regular FX Trading Divergence)

• Bullish Divergence = Lower lows in price & higher lows in the MACD
• Bearish Divergence = Higher highs in price & lower highs in the MACD

Hidden Divergence (Reverse, Continuation, Trend Divergence)

• Bullish Divergence = Lower lows in MACD & higher lows in price
• Bearish Divergence = Higher highs in MACD and lower highs in price

MACD Overbought/Oversold Trading Conditions:

The MACD can be used to identify potential overbought & oversold conditions in price movements. These conditions are generated by comparing the distance between the shorter MA and the longer Moving Average: if the shorter Moving Average separates dramatically from the longer MA it may be an indication that price is over-extending and will soon return to more realistic levels.

Implementation

The price, periods, & Moving Average type for each of the moving averages (including the Signal line) have been parameterized to allow the user full customization of the MACD indicator. The Fast line is plotted as a solid blue line. The Signal line is plotted as a solid red line. A green Histogram plot that represents the difference between the Fast line and the Signal line has also been included to make identifying their crossover points easier.

MACD