Often traders have to make decisions based on intuition. It does not always lead to a positive result of trade. It is much preferable to choose the moments I/O on the market with the help of indicators. This helps to minimize the degree of influence of the human factor and makes trading in a simple and clear set of actions. The object of the description in this article is an indicator MACD. Hard to find a more common tool for the analysis of the classical dynamics of the price.
The high popularity of this indicator due to its multifunctionality. As a rule, any tool of technical analysis refers to a specific class: trend indicators or oscillators. But with the MACD indicator is somewhat different. Its creator has taken into account the different market phases, and turned his creation into a universal tool for analyzing price charts for financial assets.
Thus, the trader using the indicator MACD, can use it to perform the operation as a trending market, and the market in which there is no clear trend (corridor).
MACD - it's Moving Average Convergence/Divergence. But in Russian - this convergence/divergence of moving averages. The name reflects the principle of the indicator. The construction of the indicator is based on three averages with periods 12, 26, 9 (classical configuration). The graph displays only two lines. This is a fast line, which is the difference between the two averages with periods of 12 and 26. And so-called signal line having a period equal to 9.
Basics of interpretation.
As can be seen from the figure, in the MACD indicator is also zero line. This is a "equator", through which light takes on the properties of the oscillator. If the MACD lines are in negative territory, the situation is classified as oversold. And if the value of the fast and the signal lines are positive, then we are dealing with a local overbought market.
Examples of using the signal indicator MACD:
- Crossing the fast line from the bottom up signal is a signal to sell;
- Crossing the fast line down the signal is a signal to buy.
It is worth noting that at small time periods MACD indicator gives a lot of false signals. In this regard, it is better to use it at intervals from H4 to Weekly.
More or less detailed description of the principles of working with the MACD indicator in one article is hardly possible. We will continue the analysis of this tool in the following articles where a detailed look at MACD-Histogram and divergence.