FOREX charts: Moving Average Convergence-Divergence
This is an ordinary analysis chart FOREX traders use that became so common among users that
almost any trading software offers a built-in MACD chart.
If you're new to FOREX and wonder what benefits you can make from this chart,
here is your answer:
The MACD chart informs us about the average of the difference between two moving averages.
On the charts you can see two lines on an open scale against the zero line (aka the "fast line" and the "slow line")
that represent the difference of the original two moving averages and the moving average of the difference.
On a standard MACD chart one line will be a solid line and the other a dotted line;
so you'll be able to distinguish between the two. Although there are three moving averages
on the chart you'll see only two. In case the "fast line" crosses above the "slow line",
it is recommended that you buy and the other way around.
MACD is commonly used as an indicator for divergence and here a few scenarios,
if the chart has made a high and starts to head down but price continues up
that is bearish divergence or if the MACD is making new lows and the price of
the security is not making new lows there is also a divergence.
The MACD also
can be used as a pointer of overbought or oversold situations. If both lines
are above the zero, the chart indicates that you over bought and vice versa.
To sum things up, by using the MACD chart intelligently you can expand your funds,
so study more about this useful tool which all professional traders use.
