Forex Moving Average Convergence / Divergence (MACD)

Moving Average Convergence / Divergence (MACD) is a simple indicator of trends in cylinders and momentum indicators developed by Gerald Appel. This indicator shows the convergence and divergence of two exponential moving averages (or often called 2-EMA) by calculating the difference between the two EMA’s. A signal line, which is the EMA of the MACD is added to indicate a bullish and bearish condition. Because of its construction, MACD is a trend indicator because it uses trends indicated by moving averages (MA) indicators and a very effective momentum indicator.

MACD MT4 indicators

MACD MT4 indicators

MACD can be plotted as two lines that fluctuate above and below the zero line, or as a MACD histogram showing the distance between the MACD and the signal line. When plotted as a line, MACD has no upper or lower bounds and thus does not indicate overbought or oversold conditions.

MACD standard size in MT4 platform using EMA 12 days and EMA 26 days from closing price. With a shorter period and faster EMA is reduced from longer periods and slower EMA. The 9 day EMA difference between two EMAs is calculated and used as signal lines to identify bullish or bearish turning points.

MACD-Histogram represents the difference between MACD (ie, between two EMA) and signal lines (ie EMA 9 days MACD). The histogram is positive (ie, above the zero line) when the MACD is above the signal line and is negative when the MACD is below the signal line.

MACD shows the convergence and divergence of two EMA.

A positive MACD score indicates that EMAs that move faster and shorter are above the longer EMA period. This is an indication of a bullish market. If the positive value increases, it indicates a positive momentum increase to the positive side; and when the positive value decreases, this indicates that the uptrend in losing momentum.

Negative MACD values ‚Äč‚Äčindicate that EMAs that move faster and shorter are under the longer EMA period. This is an indication of a bearish market. When the negative value increases, this indicates an increase in momentum to the negative side; and when the negative value decreases (towards the positive), this indicates that the downtrend in losing momentum.

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