MACD Trading Strategy

Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices.

The strongest signal of all comes as a rule from MACD divergence. Examples: (1) When the MACD graph shows a low then a higher low while the price is moving the opposite directions. (2) when the macd graph shows a high, then a lower high while the price is rising, you can expect a sharp drop in the price. When the MACD lines crossover appears, enter. When the MACD lines next crossover occurs, exit. MACD has little use in sideways trading market. It is also never used alone, but rather in combination with other indicators.

MACD is a simple system, but it requires additional touches to acheive proper performance over a long period of time. Proper use of the strategy requires a level of trial and error. Pick a currency pair and a time frame and start “playing” with MACD settings untill you achieve accurate, fast, and winning signals. You may find that filters are needed in some ranging markets.

Do you have a FOREX question? Ask a question here. No registration required and it takes less than a minute.

Tags: Divergence, Trend, Video