Moving Average Convergence/Divergence Gold Trading Analysis and MACD Trading Signals
Created by Gerald Appel,
The Moving Average Convergence/Divergence is one of the simplest, reliable, and most commonly 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 & then plots that as the 'Fast' line: a second 'Signal' line is then calculated from the resulting 'Fast' line & then drawn on the same panel window as the 'Fast' line.
- 'Fast' line - Blue Line
- 'Signal' line - Red Line
The 'standard' MACD values for the '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 & 26 exponential moving averages
- Signal Line = moving average of this difference of 9-periods
Gold Trading Analysis & How to Generate Trading Signals
The MACD is oftenly used as a trend-following indicator and works most effectively when interpreting trending market movements. 3 common techniques of using MACD to generate signals are:
XAUUSD Trading Crossovers Gold 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 Signal Line.
However, in a strong trending market this gold signal gives a lot of whipsaws, the best cross-over to use would thus be the Zero Line Crossover Signal that is less prone to whipsaws.
Zero Line Crossover Trading Signals:
- When the Fast Line crosses above zero center line a buy signal is generated.
- when the FastLine crosses below zero center line a sell trading signal is generated.
Divergence Gold Trading:
Looking for divergences between the MACD and xauusd price can prove to be very effective in spotting potential reversal and/or trend continuation points in xauusd 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 xauusd price action movements.
These levels are generated if the shorter MACD Lines separate dramatically from the median, this is an indication that xauusd price action is over-extending & it will soon return to more realistic levels.
MACD & Moving Average XAUUSD Trading Crossover Gold Trading System
This indicator can be combined with others to form a xauusd 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 in XAUUSD Trading
