Cable on MACD

Good Morning Dynamic Traders

"Better to have tried and failed, than not tried at all"

Cross = GBP : Daily Chart (Posted Below)

Long Term Trend = Down : Short Term Trend = Down

Have you printed your News Items ?

Hope you all had a great weekend and are refreshed for another exciting week in the markets. I hope you get your pips this week as easy as United got the 3pts from Chelsea.

With the interest rate cut last week and not much effect having taken place in this cross, I thought we would follow it's progress this week.

To improve our education on trading the Forex, I am going to concentrate on the MACD indicator over the week.

MACD stands for "Moving Average Convergence Divergence" and the settings you should be using are 12,26,9. Like most indicators MACD is a lagging indicator, however unlike most others it can give us a powerful forecasting on price in the future.

We have 3 parts to MACD, The MACD line, The Signal line and the histogram.

The MACD line is the difference of the 12 & 26 EMA.

The signal line is the 9 EMA of the MACD line.

The histogram is the difference between the MACD line and the 9 EMA

The MACD line above zero is bullish and below is bearish. When it crosses the zero line we have no difference between the 12 & 26 EMA.

To illustrate this I have placed the 12 & 26 EMA on our chart and on the 2 occasions MACD has attempted to cross above the zero line, you will notice the EMA's on the chart are on both times touching. (Red Arrows)Whilst I can not show you on our chart, the signal line usually crosses the MACD line 6-7 days prior to the EMA's crossing.

When the signal line crosses over the MACD line, the histogram crosses the zero line. (Blue Arrows) If the histogram is positive, MACD line is above the signal line and when negative the MACD line is below the signal line.

The MACD's strongest quality for us is Convergence / Divergence with the price, indicating a possible change of the trend. (Green Arrows)

In summary from our Daily chart, We have a down trend for some time giving lower lows, yet the MACD line is showing convergence with price over the recent lower lows. We have the signal line crossing below the MACD line, which itself is on the verge of crossing the zero line and into a Bullish zone.

Are we seeing a possible change of trend ?

Will price bounce off the EMA's ? or give a further low ?

Do we have a confluence of events ?
















Courtesy of Advanced Get / E Signal

Trade with Passion

John Maher
Forex Analyst