The reliability of a MACD deviating from a Forex signal depends on understanding what the indicator is, what it is used to detect, and determining effective strategies related to the indicator.
What is MACD?
Moving Average Convergence/Divergence (MACD) is a technical indicator used to detect points entering and exiting the market. Investors use this indicator to determine the strength before establishing a market position.
Technically, this indicator is defined by the difference between the 26- and 12-period exponential moving averages. According to the investor's preference, some of the results represent lines or histograms. Some investors want to see both on the chart. The simple moving average (SMA) is also displayed with the MACD indicator. The default SMA for most investment vehicles is usually 9 days.
How does the MACD work?
Most investors use candlesticks when applying this indicator. This indicator helps investors determine when a strong foreign exchange signal has entered or exited. This requires patience on behalf of investors. Most MACD errors are related to the frustration that investors are waiting for a strong signal. Forex traders rush into the market and lose significant profits. Patient forex traders will realize the benefits they are seeking.
No indicator is 100% reliable. This indicator is no exception. Foreign exchange traders must learn to maintain their position until the best trading situation occurs. MACD is usually used in the foreign exchange market, because delay is the most obvious indicator of the performance of the foreign exchange market. If the market moves slightly within 15 minutes, entry points cannot be established. However, if it moves significantly in the course of one to four hours or in the course of a day, investors should pay attention. Some experts suggest waiting for 3 days to ensure that no false signals will be generated. This increases the reliability of the indicator.
When different candle patterns are identified, this may indicate that the signal will change direction. For example, when two candlesticks continue to hit the same high prices on the market, many investors will enter the market. This is referred to as the "dice top" or "divergence" point, and depends on the trader's strategy being a good entry or exit point. If the price of the next candlestick is lower, this may indicate a downward trend. However, foreign exchange signals may spike in the opposite direction and produce "false signals."
Forex traders should use the MACD to deviate from foreign exchange signals and other indicators to determine when to establish a strong trading position. Investors often use indicators with relative strength index (RSI) to improve reliability and filter out false signals. If used alone, the indicator is not 100% reliable and investors are more likely to make costly mistakes.
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Orignal From: MACD Difference Forex Signal - How reliable is it?
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