MACD Indicator - Advanced Forex Strategies

MACD Indicator

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The Forex trading has spawned a lot of indicators that are designed to help every trader make the best educated guess on when and where to take a position to make a profit.

One of the most popular indicators is the MACD.

If you want to know more about this specific indicator, then stick around as the article is all about MACD.

At its core, the MACD is a moving average and convergence/divergence indicator.

It’s also an indicator that tells you if the certain pair is overbought or oversold.

A typical MACD indicator will contain horizontal lines and a dotted dash line.

There is also a “zero” line, which the horizontal lines may go up and go down from.

There are a lot of suggestions on how you may trade using MACD.

For example, there is a general rule of thumb that when the horizontal lines crosses over from the positive to the negative or vice versa, you take a trading position.

For example, if the horizontal line crosses over the negative side, it is suggested that you take a selling position.

Please be advised that this rule of thumb may be “crude” and further testing and experience may be needed before you can be profitable from such tactic.

What you can do is to put another layer of indicator or “filter” on top of MACD indicator as a means of weeding out bad trades.

For example, rather than taking a selling position when horizontal lines go from positive to negative, it’s better to wait for the dotted dash line to cross over the negative side, and then you can possibly take a selling position.

This slight variation of the tactic may already result to better trades.

However, you can put another layer of “filter” to make your trades even more accurate.

For example, aside from the suggestions above, you can also check for the nearest support or resistance.

If the dotted dash line crosses over from the positive to the negative, you then check if the current price is near the resistance.

You can then take a selling position and possibly profit while the price is going down for its correction.

If the price is near support, while the dotted dash line crosses over from positive to negative, then you might want to hold off the trade and look for better signals.

For buy positions, wait for the dotted dash line to cross over to the positive side and make sure its near a support.

The MACD is a Forex indicator and its one of the most popular indicators used by traders.

The usual MACD indicator will have a positive and negative side, representing overbought and oversold.

It also has a dotted dash line that shadows the horizontal lines.

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