MT4’s 3-color MACD indicator is of interest as it is an upgraded version of the MetaTrader MACD indicator. This is because the indicator displays both the crosses of the MACD signal lines as well as its MACD histogram. Technical Forex traders can use the MACD histogram to obtain MACD histograms for early trade signals as well as reversal signals. In addition, it is possible to receive trading signals from the MACD signal line crosses and the trading signals provided by the zero line crosses.
The indicator can be used in a variety of ways to receive bull and bear trends, as well as buy or sell signals from crossovers. It can be beneficial for new forex traders. However, advanced technical traders can benefit from it by trading with more diverse trading strategies. Its 3 MACD indicator is able to be used on any time frame of the chart and is an indicator that does not require redrawing.
3 Color MACD Indicator Trading Signals
The chart illustrates the role of the 3-color MACD indicator of the MT4 indicator. The histogram depicts how to spot a bullish pattern in blue and it shows a bearish pattern in magenta. The signal line is drawn in lime green.
It is possible to trade with this indicator in different ways. The traditional strategy is to buy whenever the signal line crosses the zero line upwards. On the other hand, traders can also sell when the signal line and the zero line cross downwards. However, this can lead to early market exit and entry signals. To prevent this, Forex traders can use histograms to get early signals.
The color change in the histogram indicates a trend that may slow down and then eventually lead to a reversal. The distance between the bars of the histogram and the signal line allows forex traders to determine the momentum of the price. Therefore, if the bars of the histogram meet the signal line and the bars of the histogram begin to retreat sharply, then a change in direction is possible. However, price action and color changes in the histogram and retracements near resistance or support lines or areas can be more confirming of trading signals.
MT4’s 3-color MACD indicator can be used on any time frame and can be used for both long term and intraday trading strategies.
The MACD Tri-Color indicator used in MT4 is the most effective trend indicator that follows the Metatrader indicator. It is a more refined version of the traditional MACD indicator.