You probably already know this:
Catching a trend when trading on IQ Option is the best thing that can ever happen to you as a trader.
And here’s why.
Trends, don’t matter if you can’t catch them at the right time. And if you can, then you should at least be proud of yourself because not so many people are privileged to ride trends and to earn profits.
Speaking of, if you want to earn profits by following trends; then you might as well start thinking of how to leverage trend-following indicators like the MACD indicator to spot the so much elusive entry and exit points in a market.
Today though, I will show you exactly how to use this awesome indicator to trade on IQ Option. Additionally, I will show you step by step procedure of how to set up this MACD indicator in the IQ Option trading platform.
With that said, let’s dive right in, shall we?
What is a MACD Indicator?
MACD is an acronym of Moving Average Convergence Divergence.
This animal right here is an indicator that pro traders on IQ Option swear by and worship, for a good reason.
MACD indicator if you already know is a trend following and momentum indicator.
What does that mean?
It means that as a trader, the MACD indicator will help you in your quest to identify developing trends in a market and possible entry points so you can enter and get out with a happy face.
It is by far one of the best trading indicators ever developed. Hence it doesn’t come as a surprise why traders adore it as you will see for yourself in a moment.
But for now, let’s look at the next important thing about the MACD indicator.
How does the MACD indicator work?
That’s a really good question.
Think for a minute, by first understanding how an indicator functions, you will be in a better position to summon your creativity and come up with unique strategies to best tap on the indicator’s capabilities.
Moving on, MACD, as we’ve already mentioned, is a trend following and momentum indicator.
To achieve results, MACD employs a combo of two lines namely:
- A slower moving average (commonly orange).
- A faster moving average (blue).
Also, it has histograms that respond to how far the two lines move away from each other.
In a nutshell, the MACD indicator is all about the convergence and divergence of these two lines. And when they do that, they generate tradable signals as we shall see in a moment.
By default, the faster-moving average is calculated based on 12 periods and the slower moving average is powered by 26-period candles.
How to interpret MACD indicator in IQ Option
Make no mistake, the MACD indicator may prove daunting, thanks to its complexity.
But the fact that you are here is a good sign you want to learn. And that’s what I will deliver.
First, you want to pay attention to the two moving averages when they cross each other because that’s where the trading signal lies.
Let me explain.
When the fast-moving average rises over a slower moving average, you should expect an uptrend.
Alternatively, when a fast-moving average drops below a slower moving average, this is a signal of a looming downtrend.
What you just saw is the common use of the MACD indicator when trading on IQ Option.
Secondly, keep an eye on the so-called centerline crossover (commonly white).
When the faster moving average rises and crosses the centerline, then continues upwards, you should brace yourself for an uptrend.
On the same note, when the faster MA cuts the centerline from above and continues downwards (below the centerline), it is a signal of impending price depreciation.
Again, using the MACD indicator in this manner is not common. But it doesn’t hurt to know, or does it?
Third and final, I know you’ve been wondering where does divergence happen, right?
Well, divergence happens when the price action and the MACD indicator move in the opposite direction.
Whenever this happens, it means that trend may soon reverse.
And there are two types of divergence normally seen in trading.
- Bullish divergence – when an instrument records a lower low while the MACD indicator shows a higher low.
- Bearish divergence – happens when the underlying instrument records a higher high and the MACD indicator forms a lower high.
One thing with this technique:
It is advanced and therefore you may need further training on how to trade it. Either way, it still deserves your attention.
How to trade MACD signals on IQ Option.
We’ve seen how to interpret MACD signals on IQ Option. Now, you are ready to see how to profit from these signals.
Enter a buy position when the fast MA crosses above the slow MA and continues moving above the center-line.
This is a positive divergence and the more the gap between them increases, the stronger the uptrend.
Enter a sell position when you see the faster moving average cross below the slower moving average and continue moving down below the center-line.
This is a negative divergence. And as the gap between the two MAs increases, so does the strength of the downward momentum of the price.
How to trade MACD divergence on IQ Option.
As we’ve already mentioned, MACD divergence is generated when the price keeps rising while the two moving average lines keep falling. Vice versa is also true.
When this happens, it signals an impending trend reversal.
However, trading MACD divergence is a bad idea. Instead, you should wait until MACD signals a clear trend and then move in for the kill.
How to set up a MACD indicator on IQ Option
- Login to your IQ Option account and click on Indicators found at the bottom left of your trading chart.
- Select Momentum and then choose MACD from the list.
That’s it, how to add MACD on IQ Option.
Take note of the following
MACD indicator on IQ Option comes with these settings: 12, 36, and 9.
I recommend you leave it as is.
Up to you now to practice MACD indicator strategies on IQ Option demo account.