Setting Up Forex MACD EA - Moving Average Convergence/Divergence EA Setup
Setting Up Forex MACD EA - Moving Average Convergence/Divergence EA - A trader can come up with an MACD - Moving Average Convergence/Divergence EA based on the MACD indicator explained below.
MACD - Moving Average Convergence/Divergence EA rules can be combined with other Forex trading indicators to come up with other Expert Advisor Forex Robots that trade using rules based on two or more indicators combined to form a trading system.
MACD - Moving Average Convergence/Divergence Forex Technical Analysis Signals
Created by Gerald Appel,
The Moving Average Convergence/Divergence is one of the simplest, reliable, and most oftenly used indicators.
It is a momentum oscillator & also a trend-following indicator.
Construction
The construction of this indicator calculates the difference between two moving averages and then plots that as the "Fast" line: a second "Signal" line is then calculated from the resulting "Fast" line and then drawn on the same panel window as the "Fast" line.
- "Fast" line - Blue Line
- "Signal" line- Red Line
The "standard" MACD values for "Fast" line is a 12-period exponential moving average & a 26-period exponential moving average & a 9-period exponential moving applied to the fast line, this plots "Signal" line.
- Fast-line = difference between 12 and 26 exponential moving averages
- Signal-line = moving average of this difference of 9-periods
Setting Up Forex MACD Expert Advisor
Forex Trading Analysis and Generating Signals
The MACD is oftenly used as a trend-following indicator & works most effectively when interpreting trending market movements. The 3 common techniques of using MACD to generate signals are:
FX Trading Crossovers Forex Trading Signals:
Fast-line/Signal Line Crossover:
- A buy trading signal is generated when Fast Line crosses above Signal Line
- A sell trading signal is generated when FastLine crosses below the Signal Line.
However, in a strong trending market this signal gives a lot of whipsaws, the best cross over to use would thus be the Zero Line Crossover Signal that's less prone to whipsaws.
Zero Line Crossover Trading Signals:
- When the Fast Line crosses above zero center line a buy trading signal is generated.
- when the FastLine crosses below the zero center line a sell trading signal is generated.
FX Trading Divergence Forex Trading:
Looking for divergences between the MACD and price can prove to be very effective in spotting potential reversal &/or trend continuation points in price movement. There 2 types of divergences:
- Classic Divergence Signals
- Hidden Divergence Trading Signals
Overbought/Oversold Conditions:
MACD indicator is also used to spot potential overbought/oversold conditions in price action movements.
These levels are generated if the shorter MACD Lines separate dramatically from the median, this is an indication that price action is over-extending & it will soon return to more realistic levels.
MACD and Moving Average FX Trading Crossover Forex Trading System
This indicator can be combined with others to form a Forex trading system. A good combination with the Moving Average crossover system. A trading signal is generated when both give a signal in the same direction.
Technical Analysis - Setting Up Forex MACD Expert Advisor
