MACD or Moving average convergence and divergence is a popular technical analysis tool used to identify upcoming trends and reversals in financial markets. this indicator was developed by Gerald Appel in the late 1970s this indicator is based on the difference between two moving averages of the security price. you can easily use and find the indicator on the IQ option trading platform.
How to configure the MACD indicator on the IQ option?
To configure the MACD indicator follow the steps below
1. Firstly, log in to your IQ Option account and select the asset you want.
2. Click on the indicator icon on the left-hand side of the platform.
3. Type in and search for the Moving average convergence and divergence indicator on the search tab.
4. Next, a small window will appear where you can customise the settings of the MACD indicator.
5. You can also change the period of fast and slow-moving average as well as the signal line period.
6. You can also change the colour of the lines and histogram if you wish.
7. After you have made your selections, click the apply button to add the MACD indicator to your chart.
How to trade with the MACD indicator on IQ Option?
Once you have added the MACD indicator to your chart, you can use it to identify the potential trends and reversals. Trading with a MACD indicator is quite easy. however, before we start you to need to understand a bit about the MACD indicator.
MACD indicator stands for Moving average convergence and divergence. this indicator is made from the composition of four important components.
1. MACD line ( Blue): It is fast moving average made from the 12 periods. this line is the main line in the indicator. it is calculated by subtracting the longer-term Exponential moving average from the shorter-term Ema.
2. Signal line (Orange): It is this slow-moving average line made from 26 periods moving average.
3. Baseline (white): It is the midline also known as the zero line. which helps to identify the strength of the trend.
4. Histogram: It is developed along with the price as the price keeps moving up or down. In the histogram, we will see green spikes as a price moves up and vice versa and red Spikes as the price moves down.
Now, talking about How to trade with the MACD indicator. when the above two moving average lines intersect each other it helps traders to find the possible trends and reversals.
When the two-moving average lines intersect each other and the fast-moving average line ( blue line) is above the slow moving average line (orange line) it signals an upcoming bullish trend. to confirm the trend you can use the histogram. if you can see some good green spikes along with the bullish trend then it’s the best time to place a buy trade.
Similarly, when the two moving average lines intersect each other and the fast-moving average line (blue line) is below the slow-moving average line (orange line) it signals an upcoming bearish trend. now you can use the histogram to confirm the trend if you see some good red spikes then it signals a strong Bearish trend. and you can place a sell trade accordingly.
