Moving Average Convergence Divergence (MACD) is a popular technical indicator used in technical analysis and trading. It was developed by Gerald Appel in the late 1970s as a means of spotting changes in the strength, direction, and momentum of a trend in a stock’s price.
The MACD works by calculating the difference between two exponentially moving averages (EMA) of prices. The most common EMA period lengths used are 26 days and 12 days, though other periods can also be used. A signal line is then generated by taking the 9-day EMA of the MACD itself.
Traders watch for crossovers of the MACD line above or below the signal line as indications of shifts in trends. A bullish crossover occurs when the MACD rises above the signal line, while a bearish crossover is seen when the MACD falls below the signal line. These crossovers are seen as buy or sell signals.
The MACD calculation results in a numeric value that fluctuates above and below zero. When the MACD is above zero, it indicates that the shorter EMA is trading above the longer EMA, showing bullish momentum. When the MACD falls below zero, it shows that the shorter EMA is trading below the longer EMA, indicating bearish momentum.
Understanding 1 Minute Charts and Timeframes
While the MACD is most commonly used on daily, weekly, and monthly charts, it can also provide useful trading signals when applied to much shorter timeframes like 1 minute charts. These high-frequency charts allow traders to spot very short-term momentum shifts and trends.
Some key things to understand about MACD 1 minute settings charts:
- They capture minute-by-minute price data, showing incredibly detailed price action. Gaps, spikes, and reversals that may be missed on longer timeframes are visible.
- Trends tend to be very short-lived, often lasting only a few candlesticks before reversing. This means signals need to be acted on very quickly.
- Due to higher volatility, random price fluctuations can create more false signals than on daily/weekly charts. Tighter stop losses are required.
- Spreads tend to be wider, and slippage is higher during volatile periods. This means entry and exit points need to be selected carefully.
- They are best suited for day traders taking short-term positions, often entering and exiting within the same 1-minute candle or period. Swings are usually smaller.
Setting Optimal MACD Parameters
When applying MACD 1 minute settings to charts, the standard 26/12/9 parameters commonly used on daily charts are generally too long. Shorter periods are needed to keep the indicator sensitive to very minor intraday shifts.
Common 1 minute MACD settings traders experiment with include:
- 5/3/3: Very short and sensitive, suitable for detecting minute momentum changes. Prone to whipsaws.
- 8/5/3: Balances sensitivity with some smoothing out of the noise. Still prone to whipsaws.
- 12/8/5: Provides clearer signals but slower to pick up subtle shifts. Reduces whipsaws.
- 15/10/8: Even less sensitive but smoother, giving clearer buy/sell opportunities. More lag.
The best settings are those that match your trading style and timeframes. More experienced traders tend to prefer less sensitive settings that generate fewer signals but have a higher win rate. Beginners often start with tighter periods.
Using 1 Minute MACD Signals
Focus on crossovers of the MACD line and a signal line for buy/sell signals on 1-minute charts. Look for:
- Bullish crossover: MACD line crosses above signal line indicating momentum shift to bullish.
- Bearish crossover: MACD line crosses below signal line indicating momentum is now bearish.
Also watch for divergences, when the MACD makes new highs/lows as price action forms tops/bottoms – these often precede reversals.
Enter trades in the direction of the signal, with targets of 15-30 pips and tight stops below recent swing lows/highs (10-20 pips). Be ready to exit quickly as trends are usually short-lived on 1 minute charts.
Test strategies rigorously on demo before trading real money, as losing trades are magnified on live accounts by high leverage at this scale. Patience and risk management are crucial skills for consistent profitability day trading with 1-minute MACD signals.
Conclusion
The MACD is a versatile indicator that can offer useful trading opportunities even at extremely high resolutions like 1-minute charts. But shorter settings are needed, and more experience is required to filter reliable buy/sell signals from the increased noise. With practice finding an optimal strategy, MACD 1 minute settings crossovers may become a profitable part of your short term day trading toolkit. Always backtest, minimize risk, and know when swift exits may be required at this scale.
