To be a successful trader, the one thing that is very necessary is analysis. Without proper analysis, it’s very tough to take proper decisions. And as a trader, earning properly is all about right decisions. The one way you can decide properly is making use of charts. And to be more specific, you need to use the right kind of indicators in charts. Of course, there are numerous indicators that do the job for you. But then you need that one powerful Forex indicator that helps you most.
As mentioned, there are numerous indicators out there. And many of these indicators do different jobs. And finding the most powerful indicator in Forex is not an easy task. That’s mainly because there are a lot of features an indicator needs to have. And it’s not possible for one to tick all boxes. But then traders and experts agree on one indicator. That is the MACD.
Moving Average Convergence Divergence is a very popular indicator. And the reason it is popular is its simplicity of use. It is so easy to sue that people recommend it even for beginners. So if you are looking to enter the world of Forex trading, MACD won’t be a bad strategy to take up. The main task of this indicator is to identify MAs or Moving Averages that indicate a new trend. Now when you want to trade in a financial market, you always want to know about trends. And market trends are what MACD are good at finding.
What it needs?
Now the working of MACD is quite simple. In fact, most users of MACD wouldn’t have to worry about how it works. But signals it gives out are very useful and easy to see. MACD uses only 3 basic numbers. It works fine with these 3 sub-indicators of sorts.
First number is the number of periods. This number calculates the faster moving average.
Then the number of periods which calculate slower moving average.
The last useful one is number of bars. That number calculates the MA of the difference between slower and faster MAs.
How it works?
Now reading an MACD chart is not too hard. That’s why it’s a powerful Forex indicator. Firstly, it is basically a histogram. So when there is a divergence of MAs, the histogram gets larger. And in case of a convergence, it gets smaller.
Now an MACD line may rise. That indicates that there is an ongoing increase in upward momentum. In that case, you need to go for a long trade. Again, MACD line may go down. Then it means there is an ongoing increase in downward momentum. In such cases, you need to go for short trades. So this is your basic method of trading using an MACD.
Thus it is a powerful indicator:
It is not a difficult job to trade using MACD. One can clearly see why even beginners favor this. It is not only easy to use; it is also quite simple to understand. That is why traders consider it a powerful Forex indicator.
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