How to Optimize MACD Indicator For Trades

MACD Moving Average Convergence Divergence is a technical indicator that is based on Moving Average indicator. Define the difference between 2 Moving Average indicators, the small period moving average indicator subtracted from the long period moving average indicator. As a result, the indicator is smoothed to eliminate whipsaw prices and give a signal line.

The difference between the MACD Moving average convergence divergence indicator line and MACD histogram. The MACD Moving average convergence divergence line is more suitable for trend analysis. And the MACD histogram is more oscillate.

MACD indicator line consists of two moving averages. The first has a smaller period (12 days), the second parameter is 26 period.

How to read MACD indicator for better trading
- if the short moving average cross up a long period moving average, this is a buy signal
- if the short moving average cross down a long period moving average, this is a sell signal


MACD-Histogram
MACD histogram works well in range trading. There are three kinds of MACD histogram signals.
- Convergence divergence signal
This signal allows you to find the beginning of a new trend. There are two types of divergence. Bullish divergence signal occurs in bearish trend. When is the next price valley is less than the previous price valley and indicator line is higher than the previous indicator line. Bearish divergence signal occurs in bullish trend. when is the the next price peak is higher than the previous price and indicator line is lower than the previous indicator peak.
- Overbought / oversold
MACD Moving average convergence divergence is also gives overbought and oversold signals.
- Crossing the zero line.
This signal mean as a neutral trend. If at this situation you have an open position, it is better to close it. This crossing signal is typical change or trend reversal signal. Better use other confirmation from other technical indicator to support your decision.