What is the MACD Trading Indicator? Creating a MACD Trading Strategy

Published on October 25, 2021

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What is the MACD Trading Indicator? In this video we’ll explian the MACD Indicator and creating a MACD Trading Strategy.

So what is MACD? MACD is an acronym for Moving Average Convergence Divergence. This technical indicator is a tool that’s used to identify moving averages that are indicating a new trend, whether it’s bullish or bearish. After all, a top priority in trading is being able to find a trend, because that is where the most money is made.

With a MACD chart, you will usually see three numbers that are used for its settings.

– The first is the number of periods that are used to calculate the faster-moving average.
– The second is the number of periods that are used in the slower moving average.
– And the third is the number of bars that are used to calculate the moving average of the difference between the faster and slower moving averages.

There is a common misconception when it comes to the lines of the MACD.

The two lines that are drawn are NOT moving averages of the price. Instead, they are the moving averages of the DIFFERENCE between two moving averages.

Because there are two moving averages with different “speeds”, the faster one will obviously be quicker to react to price movement than the slower one.

When a new trend occurs, the fast line will react first and eventually cross the slower line. When this “crossover” occurs, and the fast line starts to “diverge” or move away from the slower line, it often indicates that a new trend has formed.

Watch the full video to see MACD explained in detail and for our advice on how you can integrate this indicator in your own trading strategy. And if you’re already using an MACD trading strategy, let us know how it’s working for you in the comments.

If you liked our “MACD Trading Indicator” video, please don’t forget to give it a thumbs up! And for more on how to use the MACD indicator, forex trading tips and other how-to’s, be sure to subscribe to the Capital.com channel!

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