Moving Average Convergence/Divergence
Moving Average Convergence/Divergence (MACD) is a useful indicator for trader. This indicator is showing the ongoing trend. This indicator alsocan show you when to buy or when to sell.
In MACD there are 2 lines:
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Signal Line. This line usually drawn in red color. This line represents value of exponential moving average (EMA) in 9 days
MACD Line. This line usually drawn in blue color. This line represents the substraction of exponential moving average between 12 and 26 days (EMA12)-EMA(26)). That's why this indicator usually written as MACD(9,12,26). Note: When you are using Meta Trader platform, MACD line is shown as histogram.
How to use Moving Average Convergence/Divergence (MACD) for analysis :
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To determine trend
MACD can be used to determine trend. If MACD above the zero line, market is bullish. IF MACD below the zero line, market is bearish. -
Look at line crossing
If MACD line is above signal line, the market is in bullish trend.You can place buy position. If the opposite happen, MACD is below the signal line, the market is in bearish trend. You can place sell position. Don't enter when MACD line coincides with signal line. This indicates market is in sideways trend. -
When to BUY
To reduce risk, it is recommended that you place a buy position when MACD is above the zero line and MACD line is above the signal line. -
When to SELL
To reduce risk, it is recommended that you place a sell position when MACD is below the zero line and MACD line is below the signal line.
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