The MACD Expert advisor for MetaTrader 5 uses the **MACD indicator** in relationship with moving averages to determine, based on the price action, the correct trade entries and the best time to close a trade or to partially close it.
When a valid entry signal happens, the opposite position – if any – is closed. The EA can also close half of the position (see the Profit for closing 1/2 position parameter), as well as move it position to breakeven (Breakeven parameter). The size of the position can be set manually (Lots parameter) or as a risk percent of free margin (Risk % for a deal from free margin). For the risk percent as free margin to work, the **Money Management** must be set to true.
The **MACD EA** settings are easy to understand and self explanatory. Use the Magic Number to monitor trades opened by the expert advisor, or to allow other EAs to interfere with the MACD EA trades.
How to Trade Forex Using the MACD Indicator on Metatrader 5
The **MACD indicator**, or **Moving Average Convergence Divergence**, is a popular tool for technical analysis in forex trading. It helps traders identify the direction and strength of the market trend, as well as potential entry and exit points. In this article, we will explain how the **MACD indicator** works, how to set it up on Metatrader 5, and how to use it in your trading strategy.
What is the MACD Indicator?
The **MACD indicator** consists of three components: the MACD line, the signal line, and the histogram. The MACD line is calculated by subtracting a 26-period exponential moving average (EMA) from a 12-period EMA. The signal line is a 9-period EMA of the MACD line. The histogram shows the difference between the MACD line and the signal line.
The **MACD indicator** can be used to measure the momentum and direction of the market trend. When the MACD line crosses above the signal line, it indicates a bullish momentum and a possible buy signal. When the MACD line crosses below the signal line, it indicates a bearish momentum and a possible sell signal. The histogram can also show the strength of the trend. When the histogram is positive, it means the MACD line is above the signal line and the trend is up. When the histogram is negative, it means the MACD line is below the signal line and the trend is down. The larger the histogram, the stronger the trend.
How to Set Up the MACD Indicator on Metatrader 5
To add the **MACD indicator** to your Metatrader 5 chart, follow these steps:
- Open the chart of the currency pair you want to trade.
- Click on the Insert tab and select Indicators -> Oscillators -> MACD.
- A window will pop up where you can adjust the parameters of the indicator. The default settings are 12, 26, and 9 for the MACD line, the signal line, and the histogram, respectively. You can also change the colors and styles of the lines and the histogram. Click OK when you are done.
- The **MACD indicator** will appear below the price chart.
How to Use the MACD Indicator in Your Trading Strategy
There are several ways to use the **MACD indicator** in your trading strategy. Here are some of the most common ones:
- **Crossovers**: You can use the crossovers of the MACD line and the signal line as entry and exit signals. For example, you can buy when the MACD line crosses above the signal line and sell when the MACD line crosses below the signal line. You can also use the zero line as a confirmation of the trend. For example, you can buy when the MACD line crosses above the zero line and sell when the MACD line crosses below the zero line.
- **Overbought/oversold conditions**: You can use the **MACD indicator** to identify overbought and oversold conditions in the market. When the MACD line and the histogram are far away from the zero line, it means the market is overextended and may reverse soon. For example, you can sell when the MACD line and the histogram are above the zero line and very high, and buy when the MACD line and the histogram are below the zero line and very low.
- **Divergences**: You can use the **MACD indicator** to spot divergences between the price and the indicator. A divergence occurs when the price makes a new high or low, but the **MACD indicator** does not. This indicates a weakening of the trend and a possible reversal. For example, you can sell when the price makes a higher high, but the MACD line and the histogram make a lower high, and buy when the price makes a lower low, but the MACD line and the histogram make a higher low.
The **MACD indicator** is a versatile and powerful tool for forex trading. However, it is not a standalone indicator and should be used in combination with other technical analysis tools, such as trend lines, support and resistance levels, and candlestick patterns. You should also use proper risk management and money management techniques to protect your capital and maximize your profits.
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