MACD_Colored_v103 Indicator For MT4
The MACD_Colored_v103 Indicator For MT4 is a custom Forex indicator that is derived from the widely popular trend identifying indicator, Moving Average Convergence Divergence (MACD).
How to Interpret MACD_Colored_v103 Indicator For MT4
The MACD_Colored_v103 Indicator For MT4 differs from its classical counterpart in the following aspects:
• The input parameters are fixed as follows: Fast EMA = 5, Slow EMA = 13, Signal EMA = 1.
• The MACD bars change color every time there is an increase or decrease in bar value.
The indicator pane plots the following trading signals:
• RB – round bottom
• RT – round top
• VB – v-bottom
• VT – v-top
• TC – trend continuation
• ZB – zero bounce
This MACD_Colored_v103 Indicator For MT4 also provides traders with the below listed alert options:
• Alert_On – Enter type of signals (i.e. RB, RT, VB, VT) to activate alert.
• Email_Alert – To send e-mail alerts, enable Tools>Options>Email.
• Max_Alerts – This feature is like a snooze button. If you won’t wake up on first alert, you may activate a second.
• Alert_Before_Minutes – Set to “0” to alert on bar completion.
• Alert_Every_Minutes – This is set to ensure that a particular signal alert gets repeated after a specified number of minutes.
How to Trade Using MACD_Colored_v103 Indicator For MT4
In addition to the RB, RT, VB, VT and TC signals, the MACD_Colored_v103 Indicator For MT4 comes loaded with all the usual features of Gerald Appel’s classical MACD; the primary trading signals of which are enumerated below:
1. Zero Line Crossover
The center line on the MACD_Colored_v103 Indicator For MT4 chart represents the level “0 (zero)” The main MACD line convincingly closing above or below the center line constitutes valid trading signals. A bullish center line crossover is one in which the main MACD Line rises from below the zero-mark to turn positive. When such a scenario unfolds, it signifies that the 5-period EMA has moved above the 13 EMA. Conversely, a bearish center line crossover is charted when the MACD line drops from above the zero-mark in to negative territory.
2. Divergence between MACD and Price
Divergences in direction of MACD_Colored_v103 Indicator For MT4 with underlying price are one of the post powerful technical trading signals. Though not easy to identify, they do provide early warning to major reversals in trend. A bullish divergence is said to have been plotted when price charts a lower swing low, while the MACD line moves higher. Contrarily, a bearish divergence forms when price prints a higher swing high, while the MACD line refuses to follow suit. Traders should desist from treating divergences as standalone signals, with additional price action confirmation a necessary pre-requisite before initiating market entry.
Signals generated by the MACD_Colored_v103 Indicator For MT4 are easy to interpret and can be instantly incorporated in to any short term trading strategy. The indicator can be accused of being late in signalling key market turning points. This allegation has some merit. However, by combining a shorter and a longer time frame to enter on weakness within the ongoing trend can help overcome this limitation.