The acronym MACD hides the meaning of divergence and convergence of the moving average. The MACD indicator determines the direction and strength of the current trend. Turning points can also be determined from the indicator signals.
The MACD value is determined by the following formula:
MACD = (EMAL (P) - EMAs (P)), Signal = EMAA (EMAL (P) - EMAs (P))
MPl (P) - exponential moving average with long period
EMAs (P) - exponential moving average with short period
EDa - smoothing exponential moving average with short period
P - closing price
Settings of the MACD indicator
EMAs - short with period 12
ED l - long with period 26
NEPa - period 9
The MACD indicator is displayed as a histogram. EMAA signal - in the form of the line.
If the value of the two MA periods is equal, the MACD is located on the zero line. Cases where it crosses a zero line from the bottom up are signals to buy. Under such circumstances, a short-term increase in price relative to long-term price is formed.
When the MACD falls below zero, we prepare to open deals for sale.
The indicator shows itself well at a high level of volatility of Forex currency pairs. The most useful signals are divergence, crossing, resale and overbought.
In cases where the EMA indicator is much higher than the EMA, the price is appreciably high and will likely try to fall to normal values.
Cases in which forex market indicator values differ from current price are signals about current trend completion.
When forming Forex divergence for purchase, the following figure can be observed: