MACD — wskaznik dla Forex

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Trading the MACD divergence

Moving average convergence divergence (MACD), invented in 1979 by Gerald Appel, is one of the most popular technical indicators in trading. The MACD is appreciated by traders the world over for its simplicity and flexibility, as it can be used either as a trend or momentum indicator.

Trading divergence is a popular way to use the MACD histogram (which we explain below), but unfortunately, the divergence trade is not very accurate, as it fails more than it succeeds. To explore what may be a more logical method of trading the MACD divergence, we look at using the MACD histogram for both trade entry and trade exit signals (instead of only entry), and how currency traders are uniquely positioned to take advantage of such a strategy.

Key Takeaways

  • Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of a security’s price.
  • Traders use the MACD to identify when bullish or bearish momentum is high in order to identify entry and exit points for trades.
  • MACD is used by technical traders in stocks, bonds, commodities, and FX markets.
  • Here we give an overview of how to use the MACD indicator.

MACD: An Overview

The concept behind the MACD is fairly straightforward. Essentially, it calculates the difference between an instrument’s 26-day and 12-day exponential moving averages (EMA). Of the two moving averages that make up the MACD, the 12-day EMA is obviously the faster one, while the 26-day is slower. In the calculation of their values, both moving averages use the closing prices of whatever period is measured. On the MACD chart, a nine-day EMA of the MACD itself is plotted as well, and it acts as a trigger for buy and sell decisions. The MACD generates a bullish signal when it moves above its own nine-day EMA, and it sends a sell sign when it moves below its nine-day EMA.

The MACD histogram is an elegant visual representation of the difference between the MACD and its nine-day EMA. The histogram is positive when the MACD is above its nine-day EMA and negative when the MACD is below its nine-day EMA. If prices are rising, the histogram grows larger as the speed of the price movement accelerates, and contracts as price movement decelerates. The same principle works in reverse as prices are falling.

Figure 1 is a good example of a MACD histogram in action:

Figure 1: MACD histogram. As price action (top part of the screen) accelerates to the downside, the MACD histogram (in the lower part of the screen) makes new lows.

Source: FXTrek Intellicharts

The MACD histogram is the main reason why so many traders rely on this indicator to measure momentum, because it responds to the speed of price movement. Indeed, most traders use the MACD indicator more frequently to gauge the strength of the price move than to determine the direction of a trend.

Trading Divergence

As we mentioned earlier, trading divergence is a classic way in which the MACD histogram is used. One of the most common setups is to find chart points at which price makes a new swing high or a new swing low, but the MACD histogram does not, indicating a divergence between price and momentum.

Figure 2 illustrates a typical divergence trade:

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Figure 2: A typical (negative) divergence trade using a MACD histogram. At the right-hand circle on the price chart, the price movements make a new swing high, but at the corresponding circled point on the MACD histogram, the MACD histogram is unable to exceed its previous high of 0.3307. (The histogram reached this high at the point indicated by the lower left-hand circle.) The divergence is a signal that the price is about to reverse at the new high and, as such, it is a signal for the trader to enter into a short position.

Source: Source: FXTrek Intellicharts

Unfortunately, the divergence trade is not very accurate, as it fails more times than it succeeds. Prices frequently have several final bursts up or down that trigger stops and force traders out of position just before the move actually makes a sustained turn and the trade becomes profitable.

Figure 3 demonstrates a typical divergence fakeout, which has frustrated scores of traders over the years:

Figure 3: A typical divergence fakeout. Strong divergence is illustrated by the right circle (at the bottom of the chart) by the vertical line, but traders who set their stops at swing highs would have been taken out of the trade before it turned in their direction.

Source: Source: FXTrek Intellicharts

One of the reasons traders often lose with this setup is that they enter a trade on a signal from the MACD indicator but exit it based on the move in price. Since the MACD histogram is a derivative of price and is not price itself, this approach is, in effect, the trading version of mixing apples and oranges.

Using the MACD Histogram for Both Entry and Exit

To resolve the inconsistency between entry and exit, a trader can use the MACD histogram for both trade entry and trade exit signals. To do so, the trader trading the negative divergence takes a partial short position at the initial point of divergence, but instead of setting the stop at the nearest swing high based on price, he or she instead stops out the trade only if the high of the MACD histogram exceeds its previous swing high, indicating that momentum is actually accelerating and the trader is truly wrong on the trade. If, on the other hand, the MACD histogram does not generate a new swing high, the trader then adds to his or her initial position, continually achieving a higher average price for the short.

Currency traders are uniquely positioned to take advantage of this strategy, because the larger the position, the larger the potential gains once the price reverses. In forex (FX), you can implement this strategy with any size of position and not have to worry about influencing price. (Traders can execute transactions as large as 100,000 units or as little as 1,000 units for the same typical spread of 3-5 points in the major pairs.)

In effect, this strategy requires the trader to average up as prices temporarily move against him or her. This is typically not considered a good strategy. Many trading books have derisively dubbed such a technique as „adding to your losers.” However, in this case, the trader has a logical reason for doing so: The MACD histogram has shown divergence, which indicates that momentum is waning and price may soon turn. In effect, the trader is trying to call the bluff between the seeming strength of immediate price action and the MACD readings that hint at weakness ahead. Still, a well-prepared trader using the advantages of fixed costs in FX, by properly averaging up the trade, can withstand the temporary drawdowns until price turns in his or her favor.

Figure 4 illustrates this strategy in action:

Figure 4: The chart indicates where price makes successive highs but the MACD histogram does not – foreshadowing the decline that eventually comes. By averaging up his or her short, the trader eventually earns a handsome profit, as we see the price making a sustained reversal after the final point of divergence.

Source: Source: FXTrek Intellicharts

The Bottom Line

Like life, trading is rarely black and white. Some rules that traders agree on blindly, such as never adding to a loser, can be successfully broken to achieve extraordinary profits. However, a logical, methodical approach for violating these important money management rules needs to be established before attempting to capture gains. In the case of the MACD histogram, trading the indicator instead of the price offers a new way to trade an old idea: divergence. Applying this method to the FX market, which allows effortless scaling up of positions, makes this idea even more intriguing to day traders and position traders alike.

Trading with the MACD MA Price Indicator For MT4

The MACD is both a trend indicator and an oscillator. The acronym stands for Moving Average Convergence Divergence and the MACD MA Price Indicator For MT4 appears at the bottom of the main chart.

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It has two elements – a histogram (represented by the vertical, grey lines in the small window) and a red line following the ups and downs made by the histogram. An important aspect to consider here is the fact that the histogram is either positive or negative, meaning the zero level is crucial when trading with the MACD MA Price Indicator For MT4 .

Understanding the MACD MA Price Indicator For MT4

The best way to use an indicator is to start with understanding its elements and what they stand for. In this case, the MACD MA Price Indicator For MT4 is a representation of the actions of three distinct Simple Moving Averages (SMA).

The indicator uses MA(26), MA(12) and MA(9) and interprets the way they behave. If you are familiar with the concept of perfect order, this is what the MACD MA Price Indicator For MT4 shows.

Explaining the Perfect Order Concept

The perfect order concept belongs to moving averages. The idea behind it is to plot multiple moving averages on the same chart and wait until they align in perfect order.

For example, you can put the MA(200), MA(100), MA(50) and MA(20) on the same chart. In a strong bullish trend, the MA(20) is above MA(50), which in turn is above MA(100). And, MA(100) sits above MA(200). When this happens, it is said that the market moves in perfect order. It shows strong trending conditions. Obviously, in a bearish trend the order changes, with all the moving averages appearing the MA(200).

So what does this have to do with the MACD MA Price Indicator For MT4 ? The answer comes from the histogram – it shows the perfect order between the three MAs the indicator uses.

More precisely, when the perfect order forms in a bullish trend, the MACD histogram becomes positive (i.e. crosses above the zero level). On the other hand, when the perfect order appears in a bearish trend, the histogram turns negative.

Check the chart above. It shows the three moving averages (26, 12 and 9) used by the MACD MA Price Indicator For MT4 . Focus on when the perfect order forms for the first time. By checking the histogram, that moment coincides with the histogram turning positive or negative. It represents the main way to trade with the MACD, albeit other trading strategies exist.

How to Use the MACD MA Price Indicator For MT4

Below you can see the USDCAD pair. This is one of the main currency pairs part of the Forex dashboard, on the daily timeframe.

The vertical lines show the moment the perfect order begins. We note that this is when the histogram turns either positive or negative.

The idea is not to trade the daily chart but to acknowledge what kind of a market is. For instance, when the perfect order forms on the bullish side (i.e. the histogram is above zero), the thing to do is to go on the lower timeframes and trade on the long side until the histogram remains positive). Or, when the histogram turns negative due to the perfect order forming on the bearish side, it points to a bearish market. Therefore, just go on the lower timeframes (e.g. hourly or lower) and trade on the short side until the histogram turns positive.

Divergences with the MACD MA Price Indicator For MT4

Another way to use the MACD MA Price Indicator For MT4 is to look for divergences. Trading divergences is a strategy on its own, but traders also use it to filter the main way of trading with the indicator, as presented in the previous paragraphs.

Before anything, let’s define a divergence. Usually, the price and the oscillator move in similar directions. If the price forms two consecutive highs, the oscillator follows. Or, if the price makes a new lower low, the oscillator confirms it.

However, from time to time the oscillator fails to confirm the price’s move. It simply refuses to make a new high or a new low together with the price action in the main chart window. When this happens, it is said that a divergence forms – either bullish or bearish.

Because the oscillator typically considers multiple periods before plotting a value, traders stick with what the oscillator shows, not what the price indicates. Therefore, when the price makes two consecutive highs but the oscillator doesn’t confirm the second one, that’s a bearish divergence. If long, it is time to exit the trade. Aggressive traders go short on such a signal.

When the price makes two consecutive lows but the oscillator doesn’t confirm the second one, a bullish divergence forms. It is time to go long or to close the short positions already opened.

The oscillator, in this case, is the MACD histogram. It considers multiple periods (26, 12 and 9), therefore traders stick with what it shows.

Examples of Bullish and Bearish Divergences with the MACD MA Price Indicator For MT4

The USDCAD daily chart used so far in this article perfectly illustrates how to use divergences with the MACD MA Price Indicator For MT4 . It helps in understanding the divergence alone and how to integrate with the main way of trading with this indicator.

The two blue lines on the chart reflect a bearish divergence. As the price makes two consecutive highs, the MACD histogram fails to confirm the second high. That is a bearish divergence and spells troubles for bulls.

Coupled with the main way of trading with the MACD MA Price Indicator For MT4 , it indicates that traders should stop looking for long positions as the perfect order still indicates. Instead, traders wait for the perfect order in the opposite direction (bearish) as a confirmation of what the bearish divergence already pointed out earlier.

MACD with crossing Indicator For MT4

MACD with crossing Indicator For MT4 działa nie tylko jako lokalizator trendów, ale także oscylator pędu. Główną linią dywergencji średniej ruchomej konwergencji (MACD) jest różnica między 12-okresowym EMA a 26-okresowym EMA. Następnie wykreślana jest 9-okresowa wykładnicza średnia ruchoma głównej linii MACD, która działa jak linia sygnałowa. Crossover między główną linią MACD a linią sygnałową reprezentuje zmianę pędu. Ten wskaźnik wykreśla również dodatkowy histogram MACD, który wizualnie przedstawia różnicę między główną linią MACD a linią sygnałową. Podstawowe sygnały transakcyjne generowane przez MACD ze skrzyżowaniem Wskaźnik dla MT4 są wymienione poniżej: 1. Crossover linii sygnałowej 2. Crossover linii zerowej 3. Rozbieżność między MACD a ceną

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Instalowanie MACD with crossing Indicator For MT4

Po pobraniu wskaźnika za pomocą powyższego formularza musisz rozpakować plik zip. Następnie musisz skopiować plik MACD_with_crossing.mq4 do folderu MQL4Indicators instalacji MT4 . Następnie uruchom ponownie MT4, a wtedy będziesz mógł zobaczyć wskaźnik na liście wskaźników.

Parametry MACD with crossing Indicator For MT4

MACD with crossing Indicator For MT4 3 MACD with crossing Indicator For MT4 ma parametry 3 do skonfigurowania.

Bufory słowa MACD with crossing Indicator For MT4

MACD with crossing Indicator For MT4 zapewnia bufory 3 .

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