Setting Up Forex MACD Expert Advisor - Moving Average Convergence/Divergence Expert Advisor Setup
Setting Up Forex MACD Expert Advisor - Moving Average Convergence/Divergence Expert Advisor - A trader can come up with an MACD - Moving Average Convergence/Divergence Expert Advisor based on the MACD indicator explained below.
MACD - Moving Average Convergence/Divergence Expert Advisor rules can be combined with other Forex technical indicators to come up with other EA 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 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 and then plots that as the 'Fast' line: the 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 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
Setting Up Forex MACD Expert-Advisor
Forex Technical Analysis & How to Generate 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:
Forex Crossovers FX 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 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 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.
Forex Divergence FX Trading:
Looking for divergences between the MACD and price can prove to be very effective in spotting the potential reversal and/or trend continuation points in price movement. There 2 types of divergences:
- Classic Divergence Signals
- Hidden Divergence 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 Forex Crossover FX Trading System
This indicator can be combined with others to form a Forex system. A good combination with the Moving Average crossover system. A trading signal is generated when both give a signal in same direction.
Technical Analysis - Setting Up Forex MACD Expert-Advisor
