The MACD or Moving Average Convergence Divergence indicator is one of the most popular tools on FX charts. It can be used either as an indicator in itself, or as a check when you are mainly relying on other tools.
The MACD chart measures faster and slower moving averages and whether they are getting closer together (converging) or farther apart (diverging).
When they are converging you will see the two lines on the chart approaching each other and the bars on the histogram at the bottom of the chart become smaller. This usually indicates that the current trend is coming to an end or has ended.
The MACD indicator is one of the most useful tools of FX technical analysis but it is not usually well understood. This is a pity because many traders could probably use it more effectively if they understood it better.
The letters of its name stand for Moving Average Convergence Divergence. It is true that the name sounds rather complicated and unfortunately this is often enough to put people off from wanting to know more. So they only use the very simplest applications without understanding the power of the tool itself.
