Traders worldwide say MACD or moving average convergence/divergence is a technical analysis tool.
But, I would rather say MACD is not an indicator it is a proper trading system as it not only helps traders identify the trend but also helps in identifying the strength of the trend.
In this article, I will cover everything about MacD indicator and how you can use the same effectively on the Pocket Option trading platform.
What is the MACD indicator?
About
MacD indicator or you can call it moving average convergence and divergence indicator is a technical analysis tool via which you can identify not only the upcoming trends and reversals but also the strength of the same.
This indicator is a trend-following momentum indicator which shows the relationship between the two exponential moving averages of a security price.
Components
As I said above, The MACD indicator is a trend-following indicator that not only helps in identifying upcoming trends and reversals but also helps in analysing the strength of the same. This indicator is made from the three most important components.
- MACD line: You can calculate the MACD line after subtracting the 26-period exponential moving average (EMA) line from the 12-period EMA line.
- Signal line: This is the 9-period EMA of the MACD line.
- Histogram lines: The Histogram spikes ribbons around the indicator in the middle. It also represents the difference between the MaCD line and the signal line via this you can analyse the strength of the trend.
How to find and use the MACD indicator on the Pocket Option?
Applying the MACD indicator on the pocket option chart is very easy follow the steps given below:
1> Login to Pocket Option: The first and foremost step is to log in to your Pocket Option chart. In case, you don’t have one click here.
2> Select an asset: Once you have logged in select an asset such as currency, or stock you want to trade.
3> Find and click on the MACD indicator name: Thirdly, click on the indicators tab at the top of the page and search for the MACD indicator in the list next click the name.
4> Apply necessary amendments: Lastly, apply necessary amendments based on your trading nature and trading requirements and once you are done click apply.
How to find trend and reversal signals using the MACD Indicator?
You can easily identify buy and sell signals using the MACD indicator with the two moving averages MACD line and Signal line.
When the MACD line intersects above the signal line it signals a bullish trend similarly, When the MACD line intersects below the signal line it signals a bearish trend.
Use Histogram lines to confirm trend
You can use Histogram to confirm the strength of the trend when you notice a bullish trend with
crossover and the histogram spikes are above in a rising position it confirms a strong bullish trend and vice versa, when you notice a bearish trend with crossover and the histogram spikes is above in a declining position it confirms a strong bearish trend.
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