From Novice to Pro: Harnessing the Power of MACD in Trading

In the trading world, the use of a single indicator is always not recommended. If you have identified the opportunity, it is better to use multiple indicators to eliminate the risk of huge loss. MCAD is most widely used for predicting trends of the day or the future time. MCAD has the power to show four important events that traders use to target the opportunity.

Divergence

In linguistics, divergence means to deviate from the current track. When the market is already running in a single direction, and suddenly it changes its route and moves in another direction, going upward from downward, it means the market has changed its current direction. The divergence can be easily tracked by the MCAD indicator, and it has two types: top divergence and bottom divergence.

The MCAD top divergence refers to the graph position where its peak is lower than the other, the prices of the assets are continuing to rise, and the graph is composed of red columns. This position shows that bears have strong momentum and strength, and it signals to traders it is better to escape the top.

The MCAD bottom divergence refers to a specific moment when the currency price continues to fall, and the DIF line of the MACD indicator falls less than the asset price. It is also possible that the prices of assets will be increasing. This will indicate that the bullish forces are strengthened, which is a good time to select your favorite asset.

Golden Cross

It is the unique moment when the MCAD DIF line crosses the DEA line. In other words, when the moving average is higher than the prices. And both move in the upper direction. This will be the most accurate position to enter the trade because at this time bulls have the upper hand. In addition, although it is the best signal, the market rebounds and returns to a downward direction. So, before entering the trend, use your risk control methods.

Death Cross

This formation occurs in the MCAD graph when the DEA line crosses the DIF line, and the DIF is lower than the DEA and moves downward synchronously. This will result in falling asset prices, and bears will have the upper hand in the market, and it is the signal to sell the assets and reduce the further losses. Moreover, if a dead cross occurs above the zero axis, two scenarios are expected: it may continue to rise after a temporary correction, or it is the beginning of a large correction.