The full title of this interesting and useful tool Technical Analysis - Moving Average Convergence / Divergence. It was developed by Gerald Appel in the late 70-20's century. The fate of the developer is not less interesting than his invention. He was a psychoanalyst who tired of his financial instability. So he decided to try his hand in the financial market. The result was another success story. The average person could change his life, to become a successful trader and earn a million!
originally Binary Options Indicator MACD It consisted of two curves. A little later Thomas Esprit supplemented its histogram to obtain an even more accurate signals. Here's MACD Now live graph:
The curved lines of the indicator - a moving average. They have a very complex formula for the calculation. One line short (fast), the second line of the long-term (slow). A histogram that is drawn with respect to the zero mark, displays the differences between the curved lines and the price of the asset. If the histogram is growing, hence the value of the asset increases. If the histogram falls, hence the reduced price.
Now it is necessary to talk about themselves moving average lines. Blue Line It has a name MACD, orange line It called signal. By default, they have their own settings. But if you want every trader can change them yourself.
The signals of the MACD indicator on the live chart:
- When the MACD line crosses the blue line orange from top to bottom, you can open an option PUT.
- If the MACD crosses the blue line orange line from the bottom up, you can open an option CALL.
Not surprisingly, the MACD indicator has gained immense popularity among novice traders. Unlike most complex technical analysis tools, signals from MACD are decoded easily and clearly.
Main signal - the intersection of two lines. These are Exponential Moving Averages. The MACD baseline is calculated at the expense of the average between the 12 MA and 26 MA. The signal moving average period 9. Experienced pros sometimes change these values to achieve more accurate signals. Beginners will have enough basic settings.
Secondary signal sIt is included in the intersection of the histogram or moving averages with a zero level.
The third - divergence. It is quite difficult to recognize without experience. But the pros love them precisely for almost 100% successful signal processing. This is the divergence of the indicator readings with the price. That is, the price rises, and MACD falls, and vice versa. Such a situation on the market precedes the rapid reversal of the trend to the opposite, which is indicated by the MACD indicator.
Best of all, MACD shows itself in a volatile market. When the price calmly consolidates within a narrow horizontal side wall, it is better to wait, as there is a risk of false signals.