Moving Average Convergence Divergence MACD Indicator For MT4
Table Of Contents:
- Moving Average Convergence Divergence MACD Indicator For MT4
- Trading ideas with the Moving Average Convergence Divergence MACD Indicator For MT4
- Moving Average Convergence Divergence MACD Indicator For MT4 - Regular Bullish Divergence
- Moving Average Convergence Divergence MACD Indicator For MT4 - Regular Bearish Divergence
- Moving Average Convergence Divergence MACD Indicator For MT4 - Hidden Divergence
- Moving Average Convergence Divergence MACD Indicator For MT4 - Conclusion
The Moving Average Convergence Divergence MACD Indicator For MT4 is calculated by subtracting a faster Exponential Moving Average (EMA) from a slower EMA. The averages tend to move towards and away from one another - hence the name Moving Average Convergence and Divergence (MACD). The MACD Line is essential the graphical representation of the difference between a 12 period EMA and a 26 period EMA. A Signal Line is also plotted, which is a 9 period EMA of MACD line. Basic trading signal generated by the Moving Average Convergence Divergence MACD Indicator For MT4 are enumerated below: 1. Signal Line Crossover – A buy signal is implied when the MACD line cuts the Signal line from below. 2. Zero Line Crossover – When the MACD crosses above or below zero, it indicates that the two EMAs have had either a bullish or a bearish crossover. 3. MACD-Price Divergence – When an asset price is making higher peaks or higher troughs and the MACD is making lower highs and lower lows, a reversal in trend is imminent.
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Alerts In Real-Time When Divergences Occur
Trading ideas with the Moving Average Convergence Divergence MACD Indicator For MT4
One of the core aspects of Moving Average Convergence Divergence based indicators is that you can use it for trading hidden and regular divergence structures.
Moving Average Convergence Divergence MACD Indicator For MT4 - Regular Bullish Divergence
In the image below I am showing you how to initiate a regular divergence trade when wanting to buy on a reversal.
The MACD indicator is one of the best fundamental tools to use when it comes to regular bullish divergence trading. This tool works efficiently well for us when we are out and about looking for regular bullish divergence trade setups. In this example, we can see that the market is making lower lows but the MACD indicator is making higher lows. This is a classic example of regular bullish divergence. This trading example resulted in a huge move to the upside.
Moving Average Convergence Divergence MACD Indicator For MT4 - Regular Bearish Divergence
Let us now take a look at another example but in this case, we will open up a sell trade as shown in the image below.
The MACD indicator is still one of the best fundamental tools to use when it comes to regular bearish divergence trading. This resource works efficiently well for us when we are proactively looking for regular bullish divergence trade setups. In this example, we can see that the market is making higher highs but the MACD indicator is making lower highs.
This is a solid example of regular bearish divergence. This trading example resulted in a huge move to the downside as seen in the image above. MACD makes for simple divergence detection and trading. The main element that should grab your focus is the state of the highs when trading regular bearish divergence. Regular bearish divergence is based on the status quo of the highs of the price action and the arbitrary oscillator which is attached at the bottom of the indicator window.
In our instance, we are making use of the MACD indicator as our oscillator indicator of choice. On the other hand, we also have something called hidden divergence. Hidden divergence differs from regular divergence. At first, you would find it more comfortable to identify regular divergence patterns than it is to identify hidden divergence.
But as you train your eyes more and more then both patterns will become easy for you to trade. Regular divergence patterns are reversal patterns whereas hidden divergence structures are considered to be what is known as trend continuation patterns. That is the underlying difference between the two groups of patterns.
Moving Average Convergence Divergence MACD Indicator For MT4 - Hidden Divergence
Before I get into a few examples of hidden divergence, I just want to share a tip with you. It will not make a huge difference but it will help a little bit. When I trade hidden divergence, I like to zoom out of my screen so that I can clearly see the underlying trend and the actual hidden divergence pattern which works hand-in-hand with the preceding trend because ultimately this is a trend continuation pattern.
Usually, with hidden divergence patterns - you would find them in the middle or in the latter parts of a trend. After the pattern is formed the market will continue to trend in the dominant direction but the trend will soon come to an end and then reverse or consolidate. These are some of the things you just need to be aware of when you trade these patterns. These elements may not all come into being all the time but they do occur more often than not. Below we have an example of one of the hidden divergence structures.
In this picture we have a good example of what a hidden divergence pattern looks like. As you can see - the price action is making higher lows whilst the oscillator is making lower lows as pointed out to you by the red lines in the image. The market is already in an uptrend at the time when the hidden bullish divergence pattern was formed.
Right after the hidden bullish divergence pattern the market continued to trade up as per the trend continuation narrative set by the pattern, At first, it will take some getting used to when it comes to identifying and trading hidden bullish divergence patterns. But the more you identify them - the easier it becomes for you to gain hidden-bullish-divergence trading experience. Of course, we also have what is called hidden bearish divergence trading as illustrated to you in the image below.
In this picture we have a neat example of what a hidden bearish divergence pattern looks like. As you can see - the price action is making lower highs whilst the oscillator is making higher lows as pointed out to you by the red lines in the image. The market is already in a downtrend at the time when the hidden bearish divergence pattern was formed.
Right after the hidden bearish divergence pattern the market did indeed continue to trade down as per the trend continuation narrative defined by the pattern.
Moving Average Convergence Divergence MACD Indicator For MT4 - Conclusion
The MACD has proven to be an excellent resource o have when wanting to capitalize on trading opportunities which are presented to us as divergence patterns. Divergence trading is divided into two groups known as hidden and regular divergence trading. The popular pattern of the two is the regular divergence group of patterns.
However, hidden divergence can become easy for you provided you get used to identifying and trading them as often as you can. This indicator works effectively well for us to be able to trade both sets of patterns. Just like I pointed out before - you should associate regular divergence patterns with reversal trading. Whereas - hidden divergence trading ought to be associated with trend continuation trading.
