**Moving Average Convergence Divergence ( MACD ) Charts**

MACD was originally constructed by Gerald Appel an analyst in

The MACD is basically a refinement of the two moving averages system and measures the distance between the two moving average lines.

The most popular formula for the "standard" MACD is the difference between a Forex Market prices 26-day and 12-day Exponential Moving Averages (EMAs), for this you should set indicator settings to 12 and 26 period exponential moving averages with 9 period exponential moving average as the signal line.

How to use MACD?

When the MACD falls below its signal line, it can be considered a sell signal. Similarly, a Forex buy signal can be interpreted when the MACD rises above its signal line. It is also used as an overbought and oversold indicator. The higher above the zero both lines are the more overbought it becomes and the lower below the zero line both lines are the more oversold it becomes. It may also lead to a stronger Forex signal if the signal line crosses down when it is overbought and crosses up when it is oversold.

When the MACD is making new highs or lows, and the price is not also making new highs and lows, it signals a possible trend reversal and this can be verified with an overbought/oversold oscillator like RSI or Stochastic Oscillator.

Try to combine it with parabolic SAR and you’ll get great result on your trades.

You can use this technique for any currency at any time frame. We have to use Parabolic SAR with default settings (0.02, 0.2) and MACD with 12,26,9

**Entry Rules for Short:** Sell When Parabolic SAR gives sell signal and MACD falls below its signal line

**Entry Rules for Long:** Buy when Parabolic SAR gives buy signal and when the MACD rises above its signal line.

**Exit rules:** At the next MACD lines crossover or if the market starts trading sideways for some time.

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