A bearish crossover occurs when the macd turns down and crosses below the signal line.
You have an uptrend here (below).When it is overbought, it is riskier to go long and when it is oversold, it is riskier to go short.Macd stands for Moving Average Convergence Divergence.Lets assume that you wouldnt have macd on your chart.The second the lying game sara shepard line is calculated by smoothing the first line by a 9-period EMA.Open the MQL4 folder.Note that in the first case, the moving average convergence divergence gives us the option for an early exit, while in the second case, the trix keeps us in our position.Maybe you have heard this a lot, but it has to be reminded in this article too.
What Makes up macd?
It is important to mention that many traders confuse the two lines in the indicator with simple moving averages.
Sometimes your other indicators and even the price chart, show you a trade setup, but macd tells you to wait, and it keeps you from going against the trend and losing money.Distance between MAs (overbought/oversold since the indicator has no limit, many traders do not think of using the tool as an overbought/oversold indicator.Divergences should be taken with caution.The orange area highlights a period of positive macd values, which is when the 12-day EMA was above the 26-day EMA.The direction, of course, depends on the direction of the moving average cross.Yet, it could be suitable for looser trading styles.During sharp moves, the macd can continue to over-extend beyond its historical extremes.We hold our position until the macd lines cross in a bearish direction as shown in the red circle on the macd.This means downside momentum is increasing.