September 30, 2009

Forex Technical Analysis of MACD - Concept of convergence and Divergence

In technical analysis of forex charts, one of the most commonly used indicators is MACD (Moving Average Convergence and Divergence)

The popularity of this indicator is not just because of its ease of use, but also because of MACD's accuracy. This indicator is freely available on all charts and can be used on all the swing trading time frames (1 hr and above). Though I am not sure how accurate it is on a 5 min chart.

Most of the traders use MACD indicator in forex market just to understand if market is oversold/ undersold and if the indicator confirm to market trend. So, if the market is in up trend, so should the MACD be to place a trade.

This is indeed good since MACD is an ocscillating technical indicator and confirms both bullish as well as bearish market.

However there is one additional way in which MACD can be used, which I find that lot of traders don't  do and which is that "MACD can be used to understand Convergence and Divergence in a currency pair."

What this means is MACD can used to understand if the trend is about to end or if it is going to continue.

Here is a video that will explain it..

 

 

 

So, as yu can see, MACD if used correctly as a part of a forex trading system, it can help in doing better analysis of the forex market and more accurate entries and exit.

If you liked this video or if you would like to share your thoughts, please leave your comments.

 

 

 

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4 Comments on Forex Technical Analysis of MACD - Concept of convergence and Divergence »

October 1, 2009

Robby @ 3:12 am:

Good work Rahul.Like to see more videos. Robby

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DONALD R BYERS JR @ 6:52 am:

RAHUL YES I LIKE THE VEDIO AND IT IS SUCH A BREATH OF FRESH AIR TO SEE THAT THERE IS SOMEONE WILLING TO SHARE HIS KNOLAGE ABOUT THE FOREX MARKETS WITH OUT WANTING TO CHARGE FOR IT THANK YOU RAHUL AND MAY GOD BLESS YOU AND YOUR FAMILY ALWAYS. YOUR FRIEND DON

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Don Kuntne @ 9:04 am:

Hello Rahul,

I firmly applaud your passion and willingness to share your knowledge and expertise with all of your fellow Traders
with our challenge's out here in the Forex World. I always
enjoy your emails, keep up the great work.

Thank you so much,

Don Kuntne

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Ken Long @ 11:20 am:

My previous post did not seem to make it on the page.

Divergence from price is a good use of the MACD, and also the RSI.

In the begining of your post you seem a little confused about the two lines. The first line is the MACD line and represents the difference between the two moving averages. The second line is a 9 period moving average of the MACD line. The bar graph is a histogrem representing the difference between the MACD line and its moving average.

This confusion likely comes from using MetaTrader. MetaTrader doesnt offer the MACD histogram on their indicator. The bar graph on MetaTrader is the MACD, and the line is the moving average.

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