How to use MACD in Forex?
by John on 26/11/08 at 1:49 pm
The MACD is one of the most useful indicators for Forex traders. It gives you 2 kind of useful signals:
1 - Buy and sell signals: A cross above the 0 line is a buy signal, and a cross below the 0 line is a sell signal.
2 - Divergences - The divergences show you the strength of the trend. When price reaches an higher point while MACD reaches a lower high, you have a Bearish divergence which means the uptrend is losing steam. When Prices reach a new low while the MACD reaches an higher low then the downtrend starts to lose it’s strength and we have a Bullish divergence.
Take a look to the following chart:
In this chart you can see a buy and a sell signal. The buy signal is represented with the green arrow and the sell signal is represented with the red arrow.
You can also see that before the MACD gave a sell signal, the price reached a new high while the MACD wasn’t able to reach it’s previous high. This was a bearish divergence that showed that the uptrend was losing steam.
Josh
Nov 30th, 2008
Waoh,
I love this explanation, I find it very simple to understand.
This is something I have been looking for for a while now.
John
Dec 1st, 2008
You’re welcome Josh.
Good luck.