# How to Use MACD Indicator Strategy in Forex Explained

You can get really cheap used and refurbished laptops on eBay if you need one. Using the simple MACD histogram could change how forex traders analyze currency pairs for good. Hello Esau, Thanks for the comment! This will also not work on MT5. When your entry is delayed, because you were using indicators, you've got not much time to profit.

## Market News Headlines

Thank you so much for this indicator! This is my first review in mql store. I use it on my live charts, with vsa and dynamic trend is invincible. It's the secret ingredient that makes you a better trader, and it's for free Many, many thanks for the author. Line Break Chart MT4. User didn't leave any comment to the rating. Heru Mukti Utama As the moving averages get closer to each other, the histogram gets smaller.

And that, my friend, is how you get the name, M oving A verage C onvergence D ivergence! Whew, we need to crack our knuckles after that one! When a new trend occurs, the fast line will react first and eventually cross the slower line.

From the chart above, you can see that the fast line crossed under the slow line and correctly identified a new downtrend. Notice that when the lines crossed, the histogram temporarily disappears. As the downtrend begins and the fast line diverges away from the slow line, the histogram gets bigger, which is good indication of a strong trend. In this relation, the tool has trend-confirming character. The default MACD settings suggest the usage of two lines and a histogram placed on an area.

We will go through each of these elements explaining the Moving Average Convergence Divergence formula. The red line is the Signal Line. And the bars in the middle of the indicator represent a histogram. The most important component of the indicator is the MACD line. This is the faster line of the indicator. The slower line of the MACD indicator calculation is called a signal line. It involves the usage of another Exponential Moving Average. MACD histogram calculation is a visualized difference between the two lines of the indicator.

This means that you need to subtract the two lines to get the value of the MACD histogram. The tool involves three major signal groups, and we will now go through each one of them. The MACD crossover is the most popular signal related to the indicator. It involves the intersection of the two lines. In this relation, we recognize two types of MACD crossover:. This signal alerts that the price of the Forex pair is likely to increase.

The MACD analysis involves the recognition of divergence as well. It signalizes that the Forex pair is about to do a bullish run. It indicates that the price might drop on the chart. The video includes signals from a Falling Wedge chart pattern. Bottom line, the bullish MACD trade you just saw generated 16 pips, which equals to 0.

Although many traders are not familiar with this, you should know that the MACD trading indicator also gives signals that the Forex pair is overbought or oversold. Overbought MACD — The indicator gives an overbought signal when you notice the two lines being relatively high compared to previous highs. Oversold MACD — The indicator gives an oversold signal whey you see the two lines being at a relative low compared to previous bottoms.

If you experience difficulties in recognizing the sharp switch of the MACD line, there is a quick fix to this problem. Refer to the MACD histogram to identify unusually big bars. We will start with the classical way of trading with the Moving Average Convergence Divergence indicator. The image below will give you a better picture about this:. You see five different MACD signals on the image. The first signal comes with the first green circle on the indicator — a bullish crossover.

The second signal is a bearish crossover that leads to a price decrease. The third signal is a bit more special. The reason for this is that the third green circle points to the confirmation of two MACD signals. The first signal is an obvious bullish crossover. The second signal comes with the formation of the second MACD bottom that is increasing. But at the same time, we see that the second price action bottom is decreasing.