The MACD indicator is referred to as an oscillator, because the MACD curve swings back and forth across zero. The oscillator does not have any upper or lower limits.

Values for n1 and n2 are typically chosen as 12 and 26, respectively, or 10 and 20, when the markets are volatile. When the n1 period moving average is greater than the n2-period moving average, the MACD line is positive and negative otherwise. The MACD line is plotted as a blue line. The second curve is an n-period exponential average of the MACD line, with n typically being 9 or 5 when the markets are volatile.

This second line is plotted as a white line. Because it is a moving average of the MACD line, it will be smoother and move more slowly. The MACD is typically used to identify overbought and oversold situations, and for identifying trading signals.

The indicator is considered to identify an oversold situation when the MACD is falling and pulls away rapidly from its moving average. In that case, the exchange rate is expected to go up in the near future. Conversely, the indicator is considered to identify an overbought situations occur when the MACD is rising and pulls away rapidly from its moving average.

In that case, the currency price is expected to go down in the near future. This is for general information purposes only - Examples shown are for illustrative purposes and may not reflect current prices from OANDA.

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Trading The MACD Divergence

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How to Use MACD Indicator Strategy in Forex Explained - ForexBoat Trading Academy

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MACD Indicator Explained | Forex Indicators

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Download our Mobile Apps Currency Converter App Forex Trade App. Calculation The MACD graph shows two curves. The first curve is the MACD itself, defined as: The difference between the two lines is shown as a shaded curve.

Interpretation The MACD is typically used to identify overbought and oversold situations, and for identifying trading signals.

Trading signals are identified with the MACD indicator in a number of ways: Some argue that a buy signal is generated when the MACD crosses and goes above zero, and that a sell signal is generated when the MACD crosses and goes below zero. Hence, when the MACD is moving down while the exchange rate is still rising, then this may be interpreted as a sell signal. A stronger sell signal occurs when the MACD is reaching new lows while the corresponding exchange rate is still moving up.

Conversely, when the MACD is moving up while the exchange rate is still falling, then this may be interpreted as a buy signal.

A stronger buy signal occurs when the MACD is reaching new highs while the corresponding exchange rate is still going down. Losses can exceed investment.