The MACD technical indicator is a vital forex technical indicator that can be used stand alone to make lots of pips from the forex market.
Moving Average Convergence Divergence, simply known as MACD is a technical oscillator indicator that allows a trader to easily detect trend movement in the forex market. MACD indicator is very easy to use by even a beginner trader and works best with any currency pair or time frame.
This wonderful indicator can be used to easily detect a trend formation, or trend reversal. It also signals a ranging or no trend market. These signals greatly help traders in making important buying or selling decisions.
The MACD is a free metatrader 4 technical indicator that can be located from the Menu Bar Insert button. Selecting Indicators, then Oscillators and clicking on MACD.
The MACD parameters and properties settings should best be left in default settings. Though you make changes in the color and visualization settings to suit your taste.
Once installed correctly, the indicator should display like the image below on your chart. The indicator is an oscillator, notice how it attaches itself to the bottom of the mt4 chart.
The Simplest way of understanding this indicator is to know that it signals a rising and falling trend.
As you can see, the indicator tends to form bars of different heights along with the market.
When the market is about starting a bullish mode, MACD forms rising bars which indicate that the market is buying; this is an important buying signal.
Moreso, when the market enters a selling mode, the indicator forms falling bars which also indicate that the market is bearish.
It is important to know how to use MACD properly, as it always form bars every given period on your chart. Some of these bars could be higher or lower than previous bars, these may not necessarily mean an entry signal.
It would be wise to wait for at least 3 – 6 MACD rising or falling bars before making buying or selling trades on your account.
Once your trades are placed using MACD entry signals, it’s key to continue watching the market and the indicator bars formation, though the forming trend could last for a couple of period depending on the time frame you are using.
You should be in for a couple of profitable trades with the MACD indicator signal, don’t forget to close your trades once you have attained your profit target.
If used correctly, MACD should give you between 20 – 60 pips per trade depending on the mt4 time frame you are using.
Remember to use appropriate stop loss for any trades you enter in the Forex market in order to protect your capital from big losses.