What is MACD in Forex and what is it used for?
MACD is acronym of Moving Average Convergence Divergence. It was developed first by Gerald Appel. It is a technical analysis method to show the relevance between two moving averages of prices. MACD is also referred to as a trend following indicator. It is primarily used by forex and stock traders to find or sense changes in the most recent trend.
How is MACD calculated?
MACD is computed by subtracting 26 day exponential moving average from a 12 day exponential moving average. An accurate analysis of moving average convergence divergence is that the two lines represent a moving average that is the difference between both moving averages. A signal line is plotted on top of the MACD. It is used as a means of determining when to buy or sell an asset. It can be currency pair or stock, no matter what it is. The standard signal line is calculated as a nine-day exponential moving average. It is also called the trigger line.
There are basically three techniques that are used to evaluate and interpret moving average convergence-divergence. They are: crossovers, divergence and zero line crossover. Crossovers can be bullish or bearish. When the MACD drops below the signal line, this bearish signal is an indication that it may be time to sell the asset. On the other hand, a MACD that rises above the signal line is bullish and an indication that prices may be going up. It is a signal to buy.
Divergence occurs when the price of the asset moves opposite the moving average convergence divergence, which is a signal that the present trend has ended. The zero line crossover takes place when the MACD line rises through the center line, which is zero. This is a bullish signal and may be a buy signal for traders. MACD lines that drop down through the zero line are bearish and therefore, a sell signal for many traders.
Typically, weekly MACD scale is monitored in order to get an intermediate perspective on the market before looking at the daily scale. This ensures that the trader does not execute short-term trades that go against the prevailing intermediate trend.
Some parts of this article are derived from WiseGeek. You can check that link for more.
We are a team of professional investor in financial market including stocks markets, future markets and foreign currency exchange markets. 
mamun
26 Mar, 2010
After reading this article, I realize that it is really important to understand about MACD in Forex and It’s uses.
nadystu
26 Mar, 2010
I totally agree with you here, on forex there are only 3 basically techniques that are used to evaluate and interpret moving average convergence-divergence. The most common one, or easy one I think is crossover.
marc crauzer
26 Mar, 2010
I think you article is very well documented and very useful. Some parts of this article are derived from WiseGeek yet you have improved the article. good job
isshmen
26 Mar, 2010
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billi1717
28 Mar, 2010
Finally I know everything about MACD. I was searching for good explanation of MACD technical analysis method and finally I found this site. Great article.
dihan
29 Mar, 2010
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