Forex technical analysis indicators: methods of using MACD trading
Because there are two different moving “speed” averages, the faster one is more likely to reflect changes in prices.
When a new trend occurs, the fast line responds for the first time and eventually crosses the slow line. When this “crossover” occurs, the fast line begins to move away from the slow line, which often indicates that a new trend has formed.
From the chart above, you can see that the fast line is below the slow line, which determines the new downtrend. Note that when the two lines cross, the histogram disappears temporarily.
This is because the crossing time difference between lines in the word is zero. As the downward trend begins and the fast line gradually deviates from the slow line, the histogram becomes larger, which is a good performance of the market trend.
Let’s look at an example.
For the 1-hour chart of EUR/USD, the fast line is above the slow line, and the histogram disappears. This shows that the situation will eventually reverse in a short-term downward trend.
Since then, the EUR/USD has changed, because it has a new uptrend. Imagine if you try to cross trade, you will get nearly 200 points!
The MACD line has drawbacks. That is, the moving average lags behind the price. After all, it is just a historical average price.
Since the MACD indicator represents other moving averages, you can imagine that it lags behind the price. However, the MACD indicator is still one of the most popular tools for investors.