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How to Use MACD Indicator – Simple Effective Forex Trading Strategies Explained
Understanding the MACD Indicator
The MACD indicator is typically placed at the bottom of the trading chart, in a separate window, beneath the price chart.
The Moving Average Convergence Divergence is a relatively easy-to-use tool, however, it is crucial to understand it fully before attempting to trade using its signals.
Let’s take a close look at the structure of the MACD indicator and its default settings.
MACD Structure
The MACD indicator consists of three components. There are two lines and a histogram. Let’s now discuss each of these separately:
MACD Line – The MACD line is the faster line on the indicator. Since it reacts faster it and is more sensitive, it generally moves above and below the second line of the indicator.
MACD Signal Line – The MACD signal line is the second line of the MACD indicator. It is called a signal line, because it generates the basic MACD signals. Since the line is slower, it gets frequently breached by the faster MACD line.
MACD Histogram – The MACD histogram simply represents the difference between the MACD line and the signal line. The bigger the gap between the lines, the higher the bars that the MACD histogram will display.
Understanding the MACD Indicator
The MACD indicator is typically placed at the bottom of the trading chart, in a separate window, beneath the price chart.
The Moving Average Convergence Divergence is a relatively easy-to-use tool, however, it is crucial to understand it fully before attempting to trade using its signals.
Let’s take a close look at the structure of the MACD indicator and its default settings.
MACD Structure
The MACD indicator consists of three components. There are two lines and a histogram. Let’s now discuss each of these separately:
MACD Line – The MACD line is the faster line on the indicator. Since it reacts faster it and is more sensitive, it generally moves above and below the second line of the indicator.
MACD Signal Line – The MACD signal line is the second line of the MACD indicator. It is called a signal line, because it generates the basic MACD signals. Since the line is slower, it gets frequently breached by the faster MACD line.
MACD Histogram – The MACD histogram simply represents the difference between the MACD line and the signal line. The bigger the gap between the lines, the higher the bars that the MACD histogram will display.
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