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Chapter 12, Part II. Moving Average Convergence Divergence - MACD.

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Jun 21, 2011.

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  1. Administrator

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    Part II. Moving Average Convergence Divergence - MACD. [​IMG]
    Commander in Pips: The next indicator that we will talk about is Moving Average Convergence Divergence, but it better known as MACD. So, we will refer to it in that way – MACD. Besides, you will understand this indicator more easily, because you are familiar with MAs already and MACD is based on them.

    Pipruit: Yes, I’ve understood MAs well, at least better than your Bollinger Bands…​

    Commander in Pips: Well, there you are.

    [​IMG]
    Description of the MACD Indicator

    The major task for using MACD is estimation of trend direction. Personally, this is my favorite indicator for that purposes. Also MACD could be used for some specific price behavior identification, such as bullish/bearish divergences and market Dynamic Pressure. But this is a bit advanced for now and we will talk about those uses in later chapters. Today our task is the basics of MACD.

    As we said, MACD was born for trend identification – it extremely important for us, because trading with the trend is a primary task for any trading plan.

    MACD could be plotted on the chart two ways – with two crossing lines overtime, or as a Histogram.


    Chart #1 60-min EUR/USD and MACD (12; 26; 9)
    [​IMG]

    This indicator has three input parameters:

    1. Period for fast MA – let’s call it MA1. Usually in most software programs it has a value of 12 as default;

    2. Period for slow MA - let’s call it MA2. Usually in most software programs it has a value of 26 as default;

    3. Period for MA that averages and smooths difference between two previous ones - let’s call it MACDA (MACD Average). Usually in most software programs it has a value of 9 as default.
     
    #1 Administrator, Jun 21, 2011
    Lasted edited by : Mar 17, 2016
    Hamza Samiullah and fran alvarez like this.
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