Moving Average Convergence/Divergence (MACD) Technical Analysis MT5 Indicator

The Moving Average Convergence/Divergence (MACD) indicator was developed by Gerald Appel.

The Moving Average Convergence/Divergence (MACD) is one of the simplest, most reliable, and most commonly used indicators available. The MACD is a momentum oscillator MT5 indicator MT5 indicator with some trend-following characteristics. The most popular construction of the MACD first calculates the difference between two moving averages and draws that as the "Fast" line: A second "Signal" (trigger) line is then calculated from the resulting "Fast" line and drawn in the same frame as the "Fast" line. The "standard" MACD values for the "Fast" line are a 12-period exponential moving average and a 26-period exponential moving average and a 9-period exponential moving average for the "Signal" line.

Explanation

The 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 forex signals.

MACDCrossovers:

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

2. Fast line / Zero-Level Crossover: 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 Trading Divergence:

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

Classic Forex Divergence ( Regular Forex Trading Divergence )

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

Hidden Divergence (Reverse, Continuation, Forex Trend Divergence)

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

MACD Overbought/Oversold Forex Trading Conditions:

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

Implementation

The price, periods, and MA 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 drawn as a solid blue line. The Signal line is drawn as a solid red line. A green Histogram draw that represents the difference between the Fast line and the Signal line has also been included to make identifying their crossover points easier.

MACD