Tuesday, August 5th, 2014 by Michael Freeman
In this article I plan to explore the MACD, Moving Average Convergence Divergence indicator which goes hand in hand with my favorite binary options gold trading pattern. Professional Forex and Binary Options traders all agree that using a single indicator on it’s own is not a sufficient way to generate consistent winning trades. The use on an indicator, including the MACD must be combined with a trading pattern and ideally with fundamental analysis.
I know that many of you are not familiar with MACD and I want to break it down today and provide you an insight for how this powerful technical analysis can assist you with predicting an accelerating Bullish Trend, since MACD in definition is a ‘short-term trend following, momentum indicator! It shows us the connection between two moving averages and let me explain.
MACD has 3 components
1) MACD line = the difference between two moving averages, set by default on 12 day – 26 day EMA)
2) A signal line = 9 day EMA. Important: This is our Buy/Sell Trigger or in reference to binary options, our CALL Signal!
3) The Histograph = represents the difference between those two lines. so for example when the two lines meet the histogram is at zero.
MACD Tutorial on YouTube – Recognizing a Bullish Signal on a 60 minute chart
How do we recognize a bullish signal?
1) When the MACD line crosses over the signal line, it signals us to buy (call trade). In essence, the forumula that’s behind this indicator calculates the increasing upward momentum, and it’s presented to us visually with the MACD line crossing over the signal line.. simple as that.
2) another way to use MACD is with the centerline method where you’re basically observing the histogram and when it reaches ZERO you know that the MACD line is crossing over the Signal Line suggesting an accelerating bullish trend, signaling us of an opportunity to enter call trade once the two lines intersect and the histogram at zero, as the MACD is about to climb above the signal line.
Watch my YouTube Video explaining how to trade using the MACD Indicator with reference to the Gold Option Trading Pattern
The indicator is usually offered on all the free charting websites including on Investing.com and you can set it on 5 minute candlestick charts or 1 hour, depending on your trading preferences. The MACD is an ideal indicator for short-term and works together with my favorite Gold Trading Pattern for Binary Options which is bringing me a lot of success! If you have any questions you are welcome to comment below this post.