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MACD Forex Strategies

Center Line Crossover - Bullish and Bearish Signals

The MACD is one of the most widely and commonly used indicators available. This is a momentum oscillator with some trend following characteristics.

 

This is one of the most popular indicators used in technical analysis. It is used to generate signals using crossovers.

 

MACD plots the divergence and convergence of moving averages. It is constructed using moving average analysis. Moving Average Convergence/Divergence is a trend-following indicator. It shows the correlation between two moving averages.

 

One moving average is of a shorter period and the other for a longer period of price bars.

MACD Indicator

MACD


This indicator has a zero center line; values above zero line are bullish while those below zero are bearish.

 

In an uptrend the shorter MACD line rises faster that the longer MACD line this creates a gap. In addition as long as the indicator is above the center mark the trend is still bullish as shown below. Do not sell as long as the Indicator is above the Center Mark - this is bullish territory and it does not matter how it is moving as long as it is above the zero center mark, as shown on the example below.

MACD Above Center Line - Bullish signal

MACD Above Zero Mark - Bullish signal

 

In a downtrend the shorter MACD line falls faster than the longer MACD line this creates a gap. In addition as long as the indicator is below the center mark the trend is still bearish as shown below. Do not buy as long as the Indicator is below the Center Mark - this is bearish territory and it does not matter how it is moving as long as it is below the zero center mark, as shown on the example below.

MACD Below Center Line - Bearish signal

MACD Below Zero Mark - Bearish signal


When the trend is about to reverse the MACD lines start to move closer to each other, thus closing the gap.

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