Introduction To MACD And Volume Indicator For MT4
Table Of Contents:
- Introduction To MACD And Volume Indicator For MT4
- Key Parameters
- How To Trade Using The MACD And Volume Indicator For MT4
- Bottom Line
MACD and volume indicator for MT4 is a modified version of the authentic MACD indicator. MACD AKA. Moving Average Convergence and Divergence is a multipurpose indicator that measures the overbought and oversold conditions in the market. It also shows the change in direction, strength, and momentum. Using this indicator alone, a lot of traders generate reliable trading signals. Whereas, this modified version of the MACD indicator does all of that while also measuring the volume of an underlying asset. MACD measures the momentum while following the trend.
The values of the MACD indicator are generated by converting the EMA into an oscillator. This is done by subtracting the 26 days MA by 12 days EMA, which we call the value line. After that, calculating the moving average from that difference is known as the average line. MACD zero line is the primary trend divider line. When prices go above the zero line, it means that the buyers are strong, and when it goes below the zero line, it indicates the dominance of sellers in the market. In this MACD and volume indicator for MT4, histogram bars represent the Volume bars. When the histogram bars rise, it means that the volume is increasing. And when the bars go down, it means there is not enough volume in the market.
These are the default settings of MACD and volume indicator for MT4 indicator. We recommend you to use these settings if you are new to this indicator. Once you gain some experience, try experimenting with these settings.
- Fast Moving Average - 26 period
- Slow Moving Average - 12 periods
- Signal Line - 9 period
- Colour Bars (Volume) - Change the indicator bar colors when the tick volumes in bars increase
How To Trade Using The MACD And Volume Indicator For MT4
There are a lot of MACD trading strategies that are out there in the market. Many traders believe some of these strategies work, and some don't. But that is not true. The fact is that each and every strategy will work in different market conditions. Make sure to back-test your strategy before applying it to the live markets. By doing this, you will know at what circumstances it works and when it doesn't. In this article, we are going to share our well-proven MACD and volume indicator for MT4 trading strategy. We have back-tested this strategy enough number of times, and it works very well when the market is trending.
The strategy is simple. When the MACD lines give a sharp reversal at the oversold area, wait for them to crosses the average line. Also, see if the histogram bars are rising. If yes, you can consider that the trend is bullish and you can place the trade with the trend.
In the below AUDJPY chart, the market was in a consolidation phase. The MACD lines were also held at the oversold area. This means that the market is at the preliminary state and trading signal in the buy direction is soon expected. In this way, you can expect the trade ahead of time by using MACD and volume indicator for MT4. Furthermore, look at the encircled region. The price action breaks the consolidation phase, and MACD lines ended up crossing the average line. At the same time, histogram bars raised. This is a clear indication of increasing buy volume, and hence it is the perfect time to take the buy trade.
By using this strategy, you will find fewer trades because as it requires a lot of things to line up in one direction. The only drawback with this strategy is that it doesn't generate accurate signals when the market is in a consolidation phase. So make sure to use this strategy only in trending market conditions. Make sure to place your stop-loss at the recent low. For booking your profits, look at the opposite signal. You can also book partial profit when the MACD lines reach the overbought area. Because the ongoing buying trend is weak, and it can reverse at any time.
For the sell side, do the opposite of buying. Primarily find out the strong selling trend in the market, and wait for the MACD lines to give crossovers at the overbought area. When the MACD lines cross the average line, see if the histogram volume increases. If yes, it is a perfect time to hit the sell trade.
In the below AUDNZD chart, MACD lines gave a reversal in the overbought area. This is the preliminary sign to prepare for a sell trade. This is one of the best features of MACD and volume indicator for MT4, which indicates us to prepare for the trade ahead of time. In this way, we can get a fair idea of when the market is ready to blast.
In the image below, after giving the early signs of sell, the market finally gives us the complete signal to hit the sell. Right after taking the sell trade, our trade dropped nearly 80+ pips within a couple of hours. Patience is the real key in this strategy. When the market gives early signs, some of the traders take the trades without following the essential rules. Thereby, most often, they end up losing their money. Hence we always recommended you to follow the rules and respect the risk levels. This will improve the accuracy of your trade.
MACD and volume indicator for MT4 is one of the most reliable indicators in the market. If you use this indicator in the right manner, it will increase your win rate dramatically. This indicator will provide you with more data than the simple MACD, and this extra data will help you in having a broader look at the market. By adding the volume to the original MACD indicator, MACD and volume indicator for MT4 becomes a leading tool. Because volume comes into the market, and only then the candles print. We hope you had a good read. Happy Trading!