Moving Average Convergence/Divergence CFD Technical Analysis & MACD CFD Signals
Developed by Gerald Appel,
The Moving Average Convergence/Divergence is one of the simplest, reliable, and most oftenly used indicators.
It is a momentum oscillator & also a trend-following indicator.
Construction
The construction of this indicator calculates the difference between 2 moving averages & then plots that as 'Fast' line: a second 'Signal' line is then calculated from the resulting 'Fast' line and then drawn on the same panel window as 'Fast' line.
- 'Fast' line - Blue Line
- 'Signal' line- Red Line
The 'standard' MACD values for 'Fast' line is a 12-period exponential moving average & a 26-period exponential moving average & a 9-period exponential moving applied to the fast line, this plots 'Signal' line.
- Fast-line = difference between 12 & 26 exponential moving averages
- Signal Line = moving average of this difference of 9-periods
CFDs Technical Analysis and Generating CFDs Signals
The MACD is oftenly used as a trend-following indicator & works most effectively when interpreting trending market movements. 3 common methods of using MACD to generate signals are:
CFD Trading Crossovers CFDs Trading Signals:
Fast-line/Signal Line Crossover:
- A buy cfd signal is generated when the Fast line crosses above the Signal line
- A sell cfd signal is generated when the Fast line crosses below the Signal line.
However, in a strong trending market this cfd signal gives a lot of whipsaws, the best cross over to use would thus be the Zero Line Crossover Signal that is less prone to whipsaws.
Zero Line Crossover Signals:
- When the FastLine crosses above the zero center line a buy cfds trade signal is generated.
- when the FastLine crosses below the zero center-line a sell cfds trade signal is generated.
Divergence CFD:
Looking for divergences between the MACD and cfds price can prove to be very effective in spotting potential reversal and/or cfd trend continuation points in cfds price movement. There 2 types of divergences:
- Classic Divergence Trading Signals
- Hidden Divergence Signals
Overbought/Oversold Conditions:
MACD indicator is also used to identify potential overbought-oversold conditions in cfds price action movements.
These levels are generated if the shorter MACD Lines separate dramatically from the median, this is an indication that cfds price action is over-extending and it will soon return to more realistic levels.
MACD & Moving Average CFD Trading Crossover CFDs Trading System
This cfd indicator can be combined with others to form a cfds system. A good combination with the Moving Average crossover system. A trading signal is generated when both give a signal in same direction.
Technical Analysis in CFD Trading
