When you’re trading binary options and trying to make a profit, indicators are among the most important tools you can use. They help you predict patterns and price changes, so mastering them is something that can really benefit you financially. This is why we decided to analyze MACD, one of the most popular indicators in the world. It can really do wonders for your success rate because it’s very efficient, but still easy to understand. All trading platforms have it, and we are here to help you get the gist of using it. Read on and let our experts show you what you need to know about this topic.

MACD | Constituent parts

Moving Average Convergence Divergence (MACD) indicator is composed of two exponential moving averages (a 26-day EMA and a 12-day EMA) and a simple moving average. The latter is used as the trigger line for bullish and bearish signals – if the MACD is below it, we count that as a bearish signal, but if it’s above, we’re talking about a bullish signal. The indicator’s actual value is the result of subtracting the two previously mentioned EMAs. All of this is shown in a separate window below your Chart, which is what makes this tool very easy to use, so you should have no problems extracting data about the situation on the market. With that out of the way, we can now focus on how to use MACD in your trades. Stay with us!

MACD | How to use it

The most common use of the MACD has already been described in the previous paragraph, but we must emphasize that it’s recommended that you wait for confirmation of a move in order to avoid fakeouts. Divergence is another thing that can help you when trading with this tool because when an asset’s price moves from the MACD, you can expect the trend that is active at that moment to end. Finally, if you notice a sharp surge of the indicator’s value, this implies the asset you’re examining is in its overbought area, so you can expect a return to its usual levels shortly after that. Another good piece of advice is that you can view the zero line as MACD’s support/resistance area, which is another way of predicting how an asset is going to behave.

MACD | Conclusion

As you can see, MACD can be used in a variety of ways, and the fact that it is shown in a separate screen below your chart makes everything nice and neat. Two exponential moving averages are the most important parts of this indicator, but the whole thing is actually pretty simple and with a bit of practice, you will get the hang of things completely. Investing time into learning to use this tool can help you a lot, but don’t forget about our other educational articles here, either!


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Author: Ben Prescott

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