There are indicators in technical analysis that are more than a dozen years old. However, they do not lose their relevance and are still used by many traders. One of them is MACD. Today I want to offer you its modification – the MACD Visual indicator . Its main difference from the basic version is that the histogram is displayed not in a separate window, but on the price chart itself. This makes it easier and more convenient to analyze the market situation.
Setting up MACD Visual
In order for the indicator to generate high-quality signals for opening trading positions, it is necessary to optimize its parameters. Let’s consider them.
MA-1 and MA-2 – these variables allow you to set the required moving average periods.
Moving averages are of different types. You can choose the most preferable one using the Method parameter.
The Price parameter allows you to select the type of price that will be used in the calculations.
The Signal and S-Method parameters are designed to determine the type and period of the fast MA.
The Signal-2 and S-Method parameters determine the type and period of the slow MA.
The rest of the parameters in the settings relate to the color design of the indicator.
Trading rules for the MACD Visual indicator
Signals to open trade deals are generated when the color of the histogram changes and the indicator lines are crossed.
BUY trade orders
In order to open a buy deal, two conditions must be met:
the histogram turns blue;
the yellow line (fast MA) crossed the blue line (slow MA) and it happened in the upward direction.
This is how the purchase looks like in an example
As you can see, at first the histogram turned blue. Later, there was an intersection of the lines in the desired direction. A signal to open a BUY order has formed. In practice, it can be different: first, the lines crossed, and then the color changed. It does not matter. We enter the market when we see both conditions on the chart.
SELL trading orders
For sales, two conditions must also be met:
the histogram turns red;
the yellow line (fast MA) crossed the blue line (slow MA) in the direction from top to bottom.
An example of such a transaction
Those who used the MACD know that it is also used to track divergences. I want to warn you that MACD Visual is not suitable for this purpose.
As for the closing of trade deals, you can do this by the opposite signal of the indicator, or use one of the other methods of fixing profit.
Test the operation of the indicator, which I told you about today, on a demo account, and only after that you can include it in the TS.