MACD indicator strategies for beginners

MACD indicator strategies for beginners

MACD indicator strategies: two moving averages show a trend

MACD is a trend indicator introduced by economist Gerald Appel. It is used in technical analysis of stock trading in order to assess and predict the growth and fall of prices in the stock markets.

The indicator determines the strength and direction of the trend, as well as reversal points. MACD is based on moving averages.

This trend indicator is used both in relatively simple strategies for beginners and in the environment of advanced traders. It should be noted that MACD is only suitable for people familiar with the basics of trading. Due to the use of leverage, the risk of loss of own funds increases.

MACD can be analyzed under the graph: it looks like a histogram with one auxiliary line. Thus, you can observe the behavior of two moving lines. If they diverge, the bars of the histogram also grow. And vice versa.

The histogram drawn above the zero line means that the fast moving one rises. Therefore, the trend is characterized as upward. When approaching a moving curve, we have observed top-down processes. This is the main thing that novice traders should know.

MACD indicator strategies for opening and closing a trade

It is enough to analyze one tool to know where to access and sign out. When MACD histogram goes from the bottom up, you should open a buy trade. If on the contrary, it is necessary to sell.

Stop loss is set below the level at which the access was made (purchase). You need to sell above the maximum.

The strongest signals that are given by the indicator are convergence and MACD divergence. On the chart, the convergence is seen when connecting the vertices (or depressions) with the histogram of the indicator.

Convergence trading is conducted as follows: if the indicator shows the second level after the first one, you should buy. But the entry to the market is carried out only after confirmation of the price reversal.

In this case, the rule of multiple indicators does not work for beginners. MACD is an independent trading tool. However, professionals add two more indicators to the chart: MA and RSI.