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[QUOTE="Stan NordFX, post: 90766, member: 23437"] [B]MACD Overview[/B] This indicator is sometimes mistakenly considered an oscillator. This is not the case, because it is based on price averaging. The MACD algorithm is based on the convergence and divergence of two Moving Averages, and the histogram shows the distance between them. So MACD, unlike Stochastic or RSI, is not a stochastic oscillator, but a classic trend indicator (Fig. 3). [img]https://i.imgur.com/vTSzU7F.jpg[/img] It is a huge source of signals, as it is able to find short-term and medium-term changes of the trend, generate signals to change the global trend. Its most formidable weapon is divergence. It has become a common signal for a huge number of Forex indicators. Divergence is a reversal type of signal that is formed due to the mismatch of the extremes of the instrument with the real price. Simply put, if the price curve is still going down, and the indicator curve has already turned upstairs, this is a strong signal that the trend reversal should soon be expected. Thus, MACD, like other reversal indicators, is able not to post facto, but to warn in advance about fractures in price movements. The example is given in Figure 4: [img]https://i.imgur.com/Nl7ScVq.jpg[/img] You can see divisions above and below the 0.00 mark on the histogram. At moments when the graph crosses this zero line, a global trend change is fixed. It is clear that if the intersection occurs from bottom up, then the trend has changed from downward to rising. Accordingly, at the reverse level crossing, the trend changes from ascending to descending. Also note how the MACD histogram interacts with the signal red dotted line. Their intersection generates a signal of a short-term change in the price movement and helps to determine the moment for opening orders either for buy or sell (Fig. 5). [img]https://i.imgur.com/FmLN3ut.jpg[/img] Some Forex traders use this indicator not only together with other technical analysis tools, but also on their own. This is explained by the strength and accuracy of the MACD signals, especially if divergence occurs on the chart. [/QUOTE]
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