If you found this custom indicator to be useful as well, please share this article with other traders. This is a strong signal that the price might initiate a decrease. The MACD is only useful in trending markets, and its use in ranging market conditions is in general discouraged. Joe November 11, The popular MetaTrader 4 platform, eToro are some examples from a large list that could be assembled with ease. Mikey November 4, Suddenly the decrease slows down.
MACD Histogram is a Metatrader 4 (MT4) indicator and the essence of the forex indicator is to transform the accumulated history data. MACD Histogram provides for an opportunity to detect various peculiarities and patterns in price dynamics which are invisible to the naked eye.
The Best MACD Indicator for MetaTrader 4 (MT4)
The MACD indicator is typically placed at the bottom of the trading chart, in a separate window, beneath the price chart. The Moving Average Convergence Divergence is a relatively easy-to-use tool, however, it is crucial to understand it fully before attempting to trade using its signals. The MACD indicator consists of three components. There are two lines and a histogram. Below you will see an example of the MACD indicator: This is a zoomed image of the MACD indicator. The blue line is the MACD line.
The red line is the signal line. As you see, the MACD line is faster and it often breaks the signal line. The gray bars are the histogram, which move in harmony with the distance between the two lines of the indicator. On most trading platforms, the MACD indicator typically comes with the default parameters 26, 12, and 9.
We will interpret the meaning of these three numbers and how they apply to the structure of the indicator. These two numbers concern the calculation of the faster MACD line. The structure of the MACD line comes with calculating a period Exponential Moving Average on the price action and then subtracting a period Exponential Moving Average from the result.
The difference between the two EMAs gives you the value of the faster line. Although the MACD indicator consists only of three components the two lines and the histogram it can provide a myriad of signals. We recognize six basic signals of the MACD and now we will discuss each of these separately.
The MACD line is faster than the signal line, and it will typically cross above and below the slower signal line. Above you see a bullish MACD crossover. The green circle shows the moment when the faster MACD line crosses the signal line in the bullish direction. The price action increases afterwards. When the general price action on the chart and the MACD direction are in contradiction, this clues us in that the price is likely to change directions.
In the green rectangle on the image above you see a case where the fast MACD line gains a relatively big distance from the red signal line. This indicates an oversold MACD signal. The price of the Forex pair increases afterwards. As you see, the MACD indicator is pretty rich on technical signals, and is a very versatile trading tool. You can also trade effectively by using MACD in combination with price action analysis.
The indicator is attached at the bottom of the price graph. The image starts with a bearish divergence between the price action and the MACD indicator.
As you see, the price creates higher highs, while the tops of the MACD indicator are decreasing blue. The two MACD lines cross afterwards and the price drops. Then we see four more price swings related with bullish and bearish MACD crossovers. Every time the two lines cross we see a price swing in the direction of the crossover. In this case, the price decreases after a bearish MACD crossover. However, 7 periods later we see a potential oversold MACD signal.
The MACD line gains a significant bearish distance from the signal line. This implies that the Forex pair may be oversold and ready for a bounce. As you see, the price increases afterwards. Keeping in mind the six technical signals we discussed above we can divide the trade entry rules of the MACD indicator with the two types: When you open a trade using a MACD analysis, you will want to protect your position with a stop loss order.
To place your stop loss order effectively, you should refer to the chart for previous price action swing points. If you are opening a long trade, you could place your stop loss below a previous bottom on the chart. If you trade short, then you could place your stop loss order above a previous top.
If the price action creates a lower low on a long trade, or higher high on a short trade, your position will be closed automatically. One way to exit a MACD trade is to hold until you receive an opposite signal. So a contrary MACD signal would be your signal to close out your trade.
Hi Chris, don t know how to thank you enough,imagine using a fake MACD for over 5 years,your article is simply superb,keep it up man. I knew this would be useful to some of you as well. Hi Chris Thank you for the great information that you provided.
As the title to this blog post states, this indicator is made for MT4. I just downloaded and installed this on the latest build of MT4.
Keep in mind that this indicator is for the regular MT4 installation. You cannot use custom indicators with the mobile MT4 app. This will also not work on MT5. I trade mobile rather than on PC. You can get really cheap used and refurbished laptops on eBay if you need one. However, your trading decisions should be made using the best tools available to you.
Do you have the line drawing tool you used in your illustration? The lines in the illustration above were drawn by me in a photo editing software to illustrate the differences between the MACD signals you get from the stock MT4 MACD indicator and a traditional MACD indicator, like the one you can download from this page. They just ended up cluttering my charts more than necessary, and I hate cluttered charts. I was confused for sometime. If you need to see the code of an indicator, simply download a free MT4 platform and use the MetaEditor to view the code.
Notify me of followup comments via e-mail. You can also subscribe without commenting. This site uses Akismet to reduce spam. Learn how your comment data is processed. Click the image above to see a larger version. Chris July 16, Hello Esau, Thanks for the comment! Mikey November 4, Chris November 5, Joe November 11, Chris November 11, Sorry Mikey — the comment is meant for Chris. Let me know if you got if figured out or if you need more help. Chris March 28, Chris June 9, Seran August 8, Chris August 8, Hi Seran, As the title to this blog post states, this indicator is made for MT4.
Trading with MACD indicator includes the following signals: MACD lines crossover — a trend is changing MACD historam staying above zero line — market is bullish, below — bearish. MACD histogram flipping over zero line — confirmation of a strength of a current trend. Try MACD HISTOGRAM Metatrader indicator in your mt4 platform. This is also known as MOVING AVERAGE CONVERGENCE DIVERGENCE HISTOGRAM indicator. Read our tutorial on installing indicators below if you are not sure how to add this indicator into your trading platform. Whilst predominantly for forex (fx) trading the popularity of the platform. Jan 29, · Aimless, some time ago I developed the attached "traditional MACD" indicator for MT4. Green line = difference between EMA(12) and EMA(26). Dotted signal line = 9 period MA of green line.