What Is MACD Indicator

Moving Average Convergence Divergence (MACD) indicator is a very powerful trend indicator which is very useful for traders. A faster-moving average crossing a slower-moving average macd during its way up will indicate a bullish market and FM average crossing a smaller MA will during way down indicates bearish market. MACD has various periods of slow-moving and fast-moving average and typical MACD periods are 17, 8, 9 or 9, 26, 12.

MACD is based on 3 moving averages and usually show up only as two lines in which 17-period MA and 8-period MA are grouped to create a faster MA line. The 9 period exponential MA forms slower MA. MACD moving average lines could be read for 3 important data for giving you sell and buy signals required for placing successful trades. The 1st type of selling and purchase signals from MACD is also known as breakout which is mentioned by faster MA crossing slower MA. If you take a deep look at MACD chart, you can find out where this happens. There are some Forex traders who will exit or enter a trade based online crossing, and by doing it they could risk more losses and limit the possible gain.

Another type of sell and buy signal which is provided by MACD indicator is support and resistance. While day trading, you shall check whether indicator lines move in same direction and use as support and resistance line after occurring of a cross. You can also get divergence information from MACD indicators. When slow-moving and FM average lines go away from one another, the heap on your Forex chart will expand. When the lines come close to each other, the heap on your Forex chart will shrink. Divergence is a major tip for day trading as it can make your position strong in trade if you read it correctly. You can use MACD indicators for getting an idea about when to sell and buy based on moving averages which provide you a logical reason for success in that trader. The MACD technical indicator is especially helpful for experienced Forex day traders who are involved in speculation and scalping technique for trading.

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