You’ll know why MACD is said to take the same formulation with the MA. There is explanation about it.
MACD line. By default fromulasi MACD line is: XMA12 – XMA26 namely the difference of XMA XMA period of 12 to 26 period. Therefore using the XMA, the MACD properties will also be on the properties of XMA is to give an earlier signal than other MA.
Triger line. Triger line is the line that actually triggers the default is XMA9.
Centerline. Regular line. Is a limiting histogram zero line is negative with the positive histogram.
Histogram. Formulation for the histogram is: MACD line – triger line used as an indication of overbought / oversold. I will clarify later.
The other question is can we use XMA other periods for the MACD line and the line triger? Can. Sure you can. And if you are already proficient enough you can explore the use of different periods.
Probably occurred dipikiran us why we should bother to use the MACD but only a reduction of the XMA only. Not so in reality. Through this simple formulation MACD was able to provide information not only the trend is going to happen but more than that.
MACD can be used to determine the momentum transfer is considered strong or weak, can also be used to determine the condition of overbought / oversold on the market that can trigger the transition trend.
MACD for Trend Changes
This is a typical use of MA is used as the MACD line and the MACD line triger. How to read the transition trend from bullish to bearish and vice versa in the same way we read the transition trend in MA. The line is used to read the MACD line and the line triger. Let us consider again the image below:
Just like the rule on the reading of the Supreme Court, the rule applies when the MACD MACD line triger cut line from the bottom there will be a change in the trend toward Bullish trend. And the opposite is true when the MACD line triger cut line from the top, there will be a change in trend towards the bearish trend.
And what that does to the center line? Is there any influence of the intersection of the MACD line and triggered the change in the trend line? There! MACD line and triggered the cut line centerline is also an indication of trend change. But in this case is the change in the long term trend.
Possible criteria, is fairly relative term here. That is dependent on the type of the currency itself. Perhaps the meaning of ‘long’ for GBP is about 3 months but in the EUR and AUD could be two months for example. So depending on which currency you choose and do not forget also the time scale that we use.
Overbought and Oversold on MACD
Simple formulation of the MACD, we not only can determine the trend in both long and short term. There was another one that uses MACD overbought and oversold indicators. Although rarely used, it helps us to know it too. Maybe you like this as a decisive indicator of overbought and oversold territory.
Overbought situation is indication that the market has been experiencing saturation in buying the currency in question. If this happens then the predicted decline in prices will occur in a few moments later. So is the oversold, which means roughly oversold. If there is oversold then predicted would happen to the price strengthening its resistance point.
Notice when the histogram rising up and above the centerline (gari zero) then the prices tend to rise and vice versa when the histogram is moving down and to the negative area, the price moves down.
Line below the centerline (minus area) is a region called the oversold area and above the centerline (positive area) is overbought territory. Own price reductions occur at the time histogram (nah this is where the usefulness of histogram) left the area in question.