MACD Technical Analysis & MACD MT5 Indicator
Created by Gerald Appel,
The Moving Average Convergence/Divergence is one of the simplest, reliable, and most commonly used indicators.
It is a momentum oscillator MT5 indicator MT5 indicator and also a trend-following indicator.
Construction
The construction of this MT5 indicator calculates the difference between two moving averages and then draws that as the 'Fast' line: the a second 'Signal' line is then calculated from the resulting 'Fast' line and then drawn on the same panel window as the 'Fast' line.
- 'Fast' line - Blue Line
- 'Signal' line - Red Line
The 'standard' MACD values for the 'Fast' line is a 12-period exponential moving average and a 26-period exponential moving average and a 9-period exponential moving applied to the fast line, this plots the 'Signal' line.
- Fast-line = difference between 12 & 26 exponential moving averages
- Signal Line = moving average of this difference of 9-periods
Forex Technical Analysis & Generating FX Signals
The MACD is oftenly used as a trend-following indicator and works most effectively when interpreting trending market movements. 3 common techniques of using MACD to generate signals are:
Forex Crossovers FX 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 FastLine crosses below Signal Line.
However, in a strong trending market this 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 Forex Trading Signals:
- When the Fast Line crosses above zero center line a buy signal is generated.
- when the FastLine crosses below zero center line a sell trading signal is generated.
Forex Divergence FX Trading:
Looking for divergences between the MACD and forex price can prove to be very effective in spotting the potential reversal and/or trend continuation points in forex price movement. There 2 types of divergences:
- Classic Divergence Signals
- Hidden Divergence Signals
Overbought/Oversold Conditions:
MACD indicator is also used to spot potential overbought-oversold conditions in forex price action movements.
These levels are generated if the shorter MACD Lines separate dramatically from the median, this is an indication that forex price action is over-extending & it will soon return to more realistic levels.
MACD and Moving Average Forex Crossover FX Trading System
This MT5 indicator can be combined with others to form a Forex trading system. A good combination with the Moving Average crossover system. A forex trading signal is generated when both give a signal in same direction.
Technical Analysis in Forex Trading
