FOREX MACD
The MACD is essentially the difference between a slower exponential moving average often 26 days, and a faster moving average often 12 days. The blue line(MACD) in our diagram is the output of this difference.
The MACD also has a signal line most commonly a 9 day exponential moving average, the red line, to highlight buy and sell opportunities in the forex market when the MACD crosses the signal line.
The histogram, the black lines, are calculated by subtracting the MACD from the signal line.
There are several ways to find Long and Short opportunities in the forex chart. The first being the crossover. When the MACD crosses above the signal line a Long/Buy signal is triggered on the forex symbol and when the MACD crosses below the signal line a Sell/Short signal is triggered.
The next method of using the MACD is to gauge whether the forex symbol is overbought/oversold. When the MACD is in the top of the chart and above the signal line the symbol is considered overbought and due for a down turn alternatively when the MACD is at the bottom of the chart and below the signal line the forex symbol is considered oversold and due for an upswing. This will be indicated by a high(overbought) or low(oversold) histogram
The last method of using the MACD is to see divergence in the price. The forex symbol is considered bearish when the MACD is making a downward trend and the price is not. The forex symbol is considered bullish when the MACD is on a upward trend and the price is not.