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Indicator Review : MACD

FX:EURUSD   Euro / U.S. Dollar
Technical indicator: The MACD


What does it represent?

The MACD (Moving Average Convergence Divergence) indicator is one of the trend indicators. The MACD corresponds to the difference between two exponential moving averages of different periods (the most common are 12 and 26 days)

It is a complementary tool to moving averages that allows you to anticipate sales and purchase signals via the study of the crossover between the MACD curve and the signal line or discrepancies


How to use it?

Two ways to use it:

Study of crossings:

When the MACD line crosses the signal line upward, it is a buy signal. Conversely, when the MACD line crosses the signal line downward, it is a sales signal.

Study of divergences:

Deviations is another type of signal that can be detected using MACD curves. These signals, historically very powerful, make it possible to detect a possible significant reversal of the trend. A divergence is a technical term that describes the price of an asset that follows a trend opposite to that of an indicator.

In conclusion, the MACD it one of the most widely used trends indicators but it isn't self sufficient, you have to pair it with other such as CCI .
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