MACD Indicator Explained: Best Trading Strategy (Highly Effective)

In today's Trading Beacon tutorial, we'll be explaining exactly how to use the MACD indicator, as well as going over an effective MACD trading strategy.

The MACD indicator is very popular and is part of many different forex trading strategies (such as the MACD divergence strategy), so make sure to tune into today's video as we cover all this and more!

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The MACD, which stands for moving average convergence divergence, is a very popular momentum indicator used by traders all over the world. At first it might look a bit complicated until you begin to understand what the different components of this indicator do. So let’s set it up in our charts and we can go through the different parts of this indicator step-by-step.

To add the MACD to your chart, click on indicators at the top of the screen and search for MACD. And then click on the first search result. This will add a copy of the MACD indicator below our chart. After that, you can double click anywhere on the indicator to open up the settings window. So on this window the only thing we’re going to change is the thickness of the lines. So click on the macd line, and then at the bottom increase the thickness by one. And then click on the signal line and do the exact same thing. Now, switching over to the inputs tab, we’re going to be leaving the fast length at 12, the slow length at 26, and the signal smoothing at 9. If you followed along then your MACD indicator should look something like this.

So the first component of this indicator is the MACD line itself, which is in blue. Some traders think that this line is simply just a moving average, but this is not true: The MACD line is the result of a calculation between 2 different moving averages. So if you’re using the default settings for this indicator, then this line will be calculated by subtracting a 26 period exponential moving average from a 12 period exponential moving average.

The second component of the MACD is called the signal line, which is in orange. It’s calculated by taking a 9 period exponential moving average of the MACD line itself. Or to put it more simply, it’s taking an average of the last 9 values of the MACD line. This results in the signal line being a slightly slower, more smoothed out version of the MACD line.

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Beauty Flow by Kevin MacLeod
Link: https://incompetech.filmmusic.io/song/5025-beauty-flow
License: http://creativecommons.org/licenses/by/4.0/

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