2/19/24, 10:19 PM How to Use the MACD Indicator when Trading | IG International

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Best MACD trading strategies

The moving average convergence divergence (MACD)
indicator can identify opportunities across financial markets.
Learning how to implement the tool is crucial to a trader’s
success, so we’ve looked at three common MACD strategies.

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MACD Moving average Histogram Technical analysis Short

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2/19/24, 10:19 PM How to Use the MACD Indicator when Trading | IG International

If the market price was found to be trending upward – reaching

higher highs and higher lows, as well as breaking key levels of
resistance – traders might enter long positions. While traders might
opt to enter a short position if the asset was in a downtrend,
characterised by the lower highs and lower lows, or breaks in
support levels.

Source: IG charts
Three common MACD trading
strategies
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2/19/24, 10:19 PM How to Use the MACD Indicator when Trading | IG International

while false signals are highlights by the red lines.

Source: IG charts
2 Histogram reversals
The histogram is arguably the most useful part of MACD, with the
bars representing the difference between the MACD and signal
lines. When the market price is moving strongly in a direction, the
histogram will increase in height, and when the histogram shrinks, it
is a sign the market is moving slower.
This means that as the bars on the histogram move further away
from zero, the two moving average lines are moving further apart.
Once the initial expansion phase is over, a hump shape will likely
emerge – this is a signal that the moving averages are tightening
again, which can be an early sign that a crossover is impending.
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2/19/24, 10:19 PM How to Use the MACD Indicator when Trading | IG International

uptrend may be emerging, while the MACD crossing from above is a

signal that a new downtrend may be starting.
This is often seen as the slowest signal of the three, so you will
typically see fewer signals, but also fewer false reversals. The
strategy is to buy – or close a short position – when the MACD
crosses above the zero line, and sell – or close a long position –
when the MACD crosses below the zero line.
This method should be used carefully, as the delayed nature means
that fast, choppy markets would often see the signals issued too
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The chart below highlights three past signals on AUD/USD, with the
indicator about to issue a fourth. Each of these would have proved
profitable if the trader had entered and exited at the correct place.
And a number of false signals would have been averted by following
the zero cross method, instead of the crossover method.
When using the zero cross strategy, it is crucial to understand where
to exit the market, or place a stop. The market in the below example
provides several trendline breaks, which would have signalled a good
time to exit the trade. Alternatively, a trader could use a break below
the previous swing low (uptrend) or above the prior swing high
(downtrend) to exit the trade.
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2/19/24, 10:19 PM How to Use the MACD Indicator when Trading | IG International

might be able to spend less time monitoring your MACD, as the

signals should present themselves ahead of time.
MACD strategy key takeaways
MACD is one of the most commonly used technical analysis
indicators
It works using three components: two moving averages and a
histogram
If the two moving averages come together, they are said to be
‘converging’ and if they move away from each other they are
‘diverging’
The difference between the lines is represented on the histogram
There are three common MACD strategies: crossovers, histogram
reversals and zero crosses
There is no best time to use MACD, as it’s completely down to
personal preference and each individual’s trading plan

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the
disclaimer below, the material on this page does not contain a record of our trading prices, or an
offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility
for any use that may be made of these comments and for any consequences that result. No
representation or warranty is given as to the accuracy or completeness of this information.
Consequently any person acting on it does so entirely at their own risk. Any research provided
does not have regard to the specific investment objectives, financial situation and needs of any
specific
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2/19/24, 10:19 PM How to Use the MACD Indicator when Trading | IG International

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