Using MACD - Moving Average Convergence Divergence Indicator for Forex and CFD Trading

The MACD is a popular momentum and trend-following indicator based on the information of moving averages and, thus, ideal to act as an additional momentum tool and momentum filter for your trading.

This class will explain what the MACD indicator does, how it helps you analyze price, and how to use it in your trading.

The MACD indicator consists of three components. There are two lines and a histogram. Let's now discuss each of these separately:

MACD Line – The MACD line is the faster line on the indicator. Since it reacts quicker and is more sensitive, it generally moves above and below the second line of the indicator.

MACD Signal Line – The MACD signal line is the second line of the MACD indicator. It is called a signal line because it generates the essential MACD signals. Since the line is slower, it gets frequently breached by the faster MACD line.

MACD Histogram – The MACD Histogram represents the difference between the MACD line and the signal line. The more significant the gap between the lines, the higher the MACD histogram's bars.

Although the MACD indicator consists only of three components (the two lines and the histogram), it can provide myriad signals. We recognize six essential indications of the MACD, and now we will discuss each of these separately in class.

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