What is MACD Indicator in Forex The MACD is one of the most used Forex indicators for technical analysis. The indicator consists of two lines on an area and a histogram. Above you see a zoom-in image of the MACD Forex indicator forex macd indicator explained lyrics shows the way it will look like at the bottom of your chart.
The MACD indicator trading strategy involves making trading decisions based on signals that come from the indicator. The indicator is helpful in recognizing potential price increases and decreases. Traders use the MACD indicator Forex tool to support their Forex strategy and to open trades based on signals. What is the MACD Definition MACD is an abbreviation of Moving Average Convergence Divergence. The indicator was developed in 1970 by Gerald Appel to signalize changes in the direction, momentum and the strength of the Forex trends. MACD is a lagging indicator, which means that its signals appear after the event has begun on the chart.
In this relation, the tool has trend-confirming character. Default MACD Indicator Settings for Day Trading The default MACD settings suggest the usage of two lines and a histogram placed on an area. We will go through each of these elements explaining the Moving Average Convergence Divergence formula. The blue line is called an MACD Line. The red line is the Signal Line. And the bars in the middle of the indicator represent a histogram.
MACD Line Calculation The most important component of the indicator is the MACD line. This is the faster line of the indicator. 12-period EMA and a 26-period EMA. MACD Signal Line Calculation The slower line of the MACD indicator calculation is called a signal line. It involves the usage of another Exponential Moving Average. The truth is that the MACD signal line is a 9-period EMA of the MACD line.
MACD Histogram Explained MACD histogram calculation is a visualized difference between the two lines of the indicator. This means that you need to subtract the two lines to get the value of the MACD histogram. How to Read MACD Indicator Now let’s discuss the general MACD indicator how-to-use guide. The tool involves three major signal groups, and we will now go through each one of them. MACD Crossover The MACD crossover is the most popular signal related to the indicator.