Moving Average Convergence Divergence Expert Advisor Setup - Setting Up MACD EA

Moving Average Convergence Divergence Expert Advisor Setup - Setting Up Moving Average Convergence Divergence Expert Advisor - A trader can come up with an Moving Average Convergence Divergence Expert Advisor based on the Moving Average Convergence Divergence indicator explained below.

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 Forex Technical Analysis Signals

The MACD indicator was developed by Gerald Appel.

The MACD is one of the simplest, most reliable, and most commonly used indicators available. The MACD is a momentum oscillator with some trend-following characteristics. The most popular construction of the MACD first calculates the difference between two moving averages and plots that as the "Fast' line: A second 'Signal" (trigger) line is then calculated from the resulting 'Fast' line and plotted in the same frame as the 'Fast' line. The 'standard' MACD values for the 'Fast' line are a 12-period exponential moving average and a 26-period exponential moving average and a 9-period exponential moving average for the 'Signal' line.

Explanation

The MACD is widely used as a trend-following indicator and tends to work most effectively when measuring wide-swinging market movements. There are three basic techniques for using the MACD to generate trading signals.

MACDCrossovers:

1. FastLine/Signal Line Crossover: A buy signal occurs when the FastLine crosses above Signal-line & a sell signal occurs when the FastLine crosses below Signal Line.

2. Fast line / Zero-Level Crossover: When the Fast line crosses above zero a buy signal is given. Alternatively, when the Fast line crosses below zero a sell signal is given.

MACD Forex Trading Divergence:

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 are several types of divergences:

Classic FX Divergence (Regular FX Trading Divergence)

• Bullish Divergence = Lower lows in price and higher lows in the MACD
• Bearish Divergence = Higher highs in price and lower highs in the MACD

Hidden Divergence (Reverse, Continuation, Trend Divergence)

• Bullish Divergence = Lower lows in MACD and higher lows in price
• Bearish Divergence = Higher highs in MACD and lower highs in price

MACD Overbought/Oversold Forex Trading Conditions:

The MACD can be used to identify potential overbought and over-sold conditions in price movements. These conditions are generated by comparing the distance between the shorter moving average and the longer moving average: if the shorter moving average separates dramatically from the longer moving average it may be an indication that price is over-extending and will soon return to more realistic levels.

Implementation

The price, periods, and MA type for each of the moving averages (including the Signal line) have been parameterized to allow the user full customization of the MACD indicator. The Fast line is plotted as a solid blue line. The Signal line is plotted as a solid red line. A green Histogram plot that represents the difference between the Fast line and the Signal line has also been included to make identifying their crossover points easier.

MACD